SBF's Ex-Girlfriend Takes the Stand & California Coming For Your Skittles?

0:03When did making plans get this complicated? It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together. Use polls to settle dinner plans. Send event invites and pin messages so no one forgets Mom's 60th. And never miss a meme or milestone. All protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, how terrorist groups like Hamas use cryptocurrency to finance their operations. Then the Sam Bankman-Fried trial is heating up after star witness Caroline Ellison took the stand yesterday to do the one thing we've all wanted to do at one point, put her ex-boyfriend on blast.

0:51It's Wednesday, October 11th. Let's ride.

0:58Neil, to start the show today, I want to put a little call out to our listeners. It's been a minute since we've done one of these, but I have a couple of Morning Brew Daily coffee mugs burning a hole in my pocket that are just begging to be given away. So here's the deal, MBD listeners. Neil and I want you to post a picture of wherever you listen to Morning Brew Daily and tag us on either Twitter or Instagram. Maybe you listen in the gym on your commute, or maybe you just sit in silence in a dark room to fully soak in the experience. wherever you listen, snap a pic and tag us at MB Daily Show to enter.

1:33We'll pick three winners to receive a mug this Friday. So do not lollygag. I am pumped for this one, Neil. Tag MB Daily Show on Twitter or Instagram. We'll be looking at them all day. How big are your pockets? I know. I knew you were going to make that joke. Anyway, I just want to give a quick shouter to our sponsor, Yahoo Finance. You know what? I'm going to say it. Yahoo Finance is the best place on the internet for everyday investors. And this everyday investor, not a financial advisor, of course, was on it last night learning more about the Birkenstock IPO happening today. $46 a share of Toby, good for a market cap of$8.6 billion.

2:11Crocs must be shaking in their cowboy boots right now. If you want to access trusted news, in-depth analysis, and comprehensive market data, go to finance.yahoo.com to learn more or download the Yahoo Finance mobile app to get it directly on your phone. Tonight on NBC, Jimmy Fallon and Bozema St. John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars.

2:48I'm so excited to embark on this adventure with all of you. Make the best idea win! On brand with Jimmy Fallon. Series premiere tonight on NBC. Okay, let's start with the Israel-Hamas war. And before we get into it, I just want to say this is a podcast about business news. Toby and I try to put a smile on your face as you listen each morning. But we also recognize that it's been a really hard week for many of our listeners as we begin to learn more about the atrocities that occurred in southern Israel on Saturday. Some of you may know a family that was killed or taken hostage. Some of you are worried, like I am, about your friends that have been called up for reserve duty to fight in the Israeli army.

3:26Some of you may know people in Gaza who are scared for their lives as bombs rain down, unsure of where they'll get their next meal or sleep at night. This is a human tragedy above all, so I just wanted to take some time at the top of the show to acknowledge that. Okay, here is the latest on the war. In a speech at the White House yesterday, President Biden issued one of the most powerful statements supporting Israel of really any president in U.S. history, definitely since Harry Truman in 1948, calling the Hamas attacks pure evil and reiterating that the U.S. has Israel's back. Israel, meanwhile, is amassing troops for a likely ground operation into Gaza, as it appears like it may be only a matter of time before that happens.

4:07What Toby and I wanted to discuss today is how Hamas, a terrorist group that's blocked from accessing the global banking system, financed their attack that stunned the world with its complexity, planning and use of modern technology such as rockets, drones and paragliders. How did it possibly pay for this? Yes, we know that Hamas gets$100 million from its benefactor, Iran, each year, but a bulk of its funding comes from a different source entirely, cryptocurrency. A report from The Wall Street Journal dug into the finances of Hamas and its affiliates and found massive sums raised through crypto.

4:42The Palestinian Islamic Jihad, a militant group that breached the border with Hamas on Saturday and took hostages, collected$93 million worth of crypto between June 2021 and August 2023. Hamas itself collected about$41 million in digital payments. It started raising money through crypto as early as 2019 when it put out a call on social media for users to donate Bitcoin to its cause. This is definitely part of a trend that national security experts are very concerned about. Terrorist groups all over the world are increasingly turning to crypto, which has a reputation for anonymity and far fewer regulations than traditional finance, to raise money for their operations.

5:20Yeah. Crypto is a very appealing alternative for a lot of these groups because, of course, when you are deemed a terrorist organization, as you mentioned, you are cut off from the global financial system. So anyone found transacting with those entities risk criminal prosecution. So, of course, you turn to crypto, which exists outside the bounds of that international banking system. And so but you also might be wondering, how are we tracking down some of these wallets? But a lot of this is happening out in the open in some cases, because I think you mentioned as well, there's a Telegram channel that was set up that is publicly fundraising via Bitcoin.

5:56So they posted their wallet address there. So authorities can literally track this wallet down. They know it's associated with these militants. And that's one of the reasons why even though crypto is anonymous, you can track a lot of these wallets because they're fundraising out in public. Right. I think you do know you can see the transactions happening on the blockchain ledger. It's a little opaque as to who is doing it. And there's this huge industry that's cropping up. There are these firms like Chainalysis that are working with law enforcement all over the world and counterterrorism organizations to find out who is actually behind this.

6:31And they're pretty successful at it. You also have to work with crypto exchanges where this is happening, which is a whole other scenario. The leading crypto exchange, Binance, has been a target for the DOJ and other U.S. regulators for fostering money laundering operations by terrorist organizations. And in the DOJ, the DOJ sued Binance over this earlier this year in the in the lawsuit. It said that Binance's compliance chief acknowledged that Hamas used the company to send funds to avoid money laundering controls. So Binance, you know, says it's working on this, but it also has been accused of looking the other way.

7:08Yeah, it is interesting because as Binance is just fighting for the right to exist legally in the U.S., they're also fighting this other kind of war against these terrorist groups that are using their platform as well. So it's kind of seeing it from both sides. It is interesting, too, tracking where some of these funds are coming from. Some funds actually ended up a there was an India, a hack in India on certain cryptocurrencies and through various trackings, various wallets. They tracked it all the way to Hamas. So it is interesting to see how this cryptocurrency is flowing from all parts of the world, sometimes through just donations, sometimes through hacks and ending up in these these terrorist wallets.

7:48Well, cash, we should say cash is definitely king here because that is the most untraceable method of financing terror. And Hamas gets a lot of its cash through smuggling from Egypt into Gaza. But cryptocurrency, especially this new one called Tether on the Tron blockchain, is becoming increasingly used in terror attacks. There was a UN report last year that said a couple of years ago, 5 % of terrorist attacks were financed by crypto or other digital assets. Now we're thinking that it may reach 20%. So crypto is a very good way. I mean, for all of the promise of crypto, right? It's outside of the banking system and it's not controlled by a central bank.

8:31There's little oversight. And that was seen as the democratization of finance. But it's also, you know, has this horrible reputation for being used by criminals and terrorists because it's so easy to cross borders with it. That's like one of the biggest reasons why they use crypto is because I can easily get it from Egypt to Gaza, from Iran to Gaza. Let's move on to another story involving crypto, the ongoing Sam Bankman free trial. Things started to heat up yesterday when Caroline Ellison took the stand. If that name sounds familiar, it's because she is all sorts of tied up in this saga, from running Alameda Research, the crypto hedge fund associated with FTX, to being Sam's on-and-off-again girlfriend.

9:11And things got off to a weird start yesterday. Ellison started her testimony by taking more than 10 seconds to even identify her former boss and lover when a prosecutor asked her to point him out. But she soon left any uncertainty behind and began to testify pretty explicitly against Sam. He directed me to commit these crimes, she said at one point. Also mentioning that there was a power imbalance between the two, given the romantic and professional relationship. All this to say, Neil, that we got some fireworks and prosecutors have started to get some answers around just how financially intertwined FTX and Alameda were and how much SBF knew about it.

9:49Ellison is the star witness here, and we should say that she did take a plea deal. She pleaded guilty, so she is going to talk. She is cooperating with prosecutors. Let's talk about Alameda because this is the crux of the crimes that FDX is alleged or SPF is alleged to have made. He is accused of using FTX, which was full of billions of customer funds, as the personal ATM machine for Alameda. And Alameda made all of these illiquid investments into venture capital and really sketchy crypto tokens. So the crux of the prosecutor's argument here is that Alameda, which was run by Caroline, and she said she was directed by SBF to take all these customer funds and use them on risky bets.

10:35That is the relationship between these two entities is at the core of the prosecutor's case against SBF. Yeah, and also Ellison's at the core of SBF's case to try to clear his name because what they are trying to prove is that Ellison was this person acting under her own accord and that she was the one who ignored his instructions and made mistakes managing Alameda. So it kind of is this he said, she said deal where Ellison is saying, listen, SBF had all the power in this relationship. He was the one telling me to have kind of this open line of credit between. unlimited line of credit. That's the most absurd part.

11:14It's like going to an ATM. And then if you see the top end of it being a hundred, it's, you know, there's an infinity symbol. Yeah, truly. I mean, you mentioned the ATM analogy. That truly was what people have been likening it to, is that whenever Alameda needed some extra funds in order to make some of these risky investments, they could just tap into FTX's customer funds. And so again, SBF is trying to say, no, this was Caroline, she was in charge of this hedge fund. It's on her while Caroline is trying to say, no, SBF was telling me what to do. There were also some other juicy details that came out.

11:46Caroline said that Sam Bakeman-Fried told her that he calculated he had a 5 % chance of becoming president of the U.S. one day, which speaks to his broader political ambitions. And there is this also hypothetical coin toss. Did you read about this? So SBF likes to take this coin toss question And there's a scenario in which you say, hey, if I flip a coin, if the coin lands on tails, then humanity will cease to exist. Like the world will end. But if it lands on heads, then the world will be twice as happy. Wait, so what is this framework? He says that SBF is so idealistic, so intent on improving humanity.

12:28So he says that he would take the coin flip. Oh, interesting. He would say, I would give a 50-50 % chance of making the world a better place 2X, or I would wipe it off the face of the earth. I would take that chance. That's some hubris right there on a lot of levels. I also, Neil, what is your percentage of becoming president? Because clearly people are just calculating it these days. What's your level at? Less than 1%. I am not a politician. I'll put you in there. Yeah, I'm not into that. I can't even host a podcast and promote it. Okay, moving on. You may have heard rumors that California just banned Skittles.

13:04Those rumors are not true. You can still taste the rainbow from San Diego up to Tahoe. However, California did enact a law that prohibits four food additives found in 12 ,000 candies, cereals, drinks on Saturday due to scientific research linking them to cancer, reproductive issues, and behavioral and developmental problems in children. These additives are, I'm going to try to get this right, red dye 3, propyl paraben, brobinated vegetable oil, and potassium bromate. Let's go. And they're found in everything from peeps to trail mix. The reason you heard so much about Skittles earlier this spring is that titanium dioxide, a coloring agent that's in Skittles, Starburst, and Sour Patch Kids, was included in an earlier version of the ban, but everyone came to their senses and it was ultimately left out.

13:51With its ban on these four additives, the first of any state to do this, California joins the EU and many other countries that have restricted them. The goal for lawmakers who sponsored this bill is not only to protect consumers in California, but also to push the entire U.S. to get rid of them. California is such a massive consumer market. So if manufacturers have to tweak their formulas for California stores, they might as well just make changes for their products nationwide. Right. A lot of these regulations are based off of what the EU is already doing. So regulators can clearly point to Europe and say, why the heck are we so far behind the rest of the world when it comes to food safety?

14:27It's been banned in Europe for a while. But then there's also a little bit of pushback on this as well, because various food and beverage associations are saying, listen, the FDA has certified these foods as being safe for a reason. And so anytime now we're just messing with consumer confidence, why are we making this patchwork approach and letting states determine which foods are or shouldn't be included in the foods we eat, even though the FDA is supposed to be the national advisor on this? And so I see it from both sides a little bit because it is classic, but because it would it does disrupt a lot of the manufacturing.

15:02And California did give until 2027, I believe, in order to institute these changes. But I can see how it frustrates you if you're a food manufacturer, if you have to adopt this piecework approach on a state level. And it's not just manufacturers. You know, you assume that they are going to be against this. But also food experts at UC Davis named James Coughlin told reporters that banning the chemicals is unnecessary and unscientific. So he kind of supports that claim. But we should all, I just want to talk about some of these chemicals. Brominated vegetable oil, that is added to popular citrus drinks to prevent the flavoring oils from floating on top.

15:39It's so gross on so many levels because it's an oil to prevent other oils from bubbling up and separating. So I never want my oil determining what another oil does. That's just a baseline in whatever food I eat. So this law will go into effect in 2027. So manufacturers will either have to take their products off shelves or tweak their formulas by then. Neil, we could talk about brominated oils for the rest of the show, but we got to take a quick break. But don't go anywhere because we have a story about a Home Depot crime ring coming up in the second half of the show. Hey, business owners. We know you know the importance of maximizing every dollar.

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16:45Here we have the Lemo Emu in its natural habitat, helping people customize their car insurance and save hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally, Doug. Uh, Lemu, is that guy with the binoculars watching us? Cut the camera. They see us. Only pay for what you need at LibertyMutual.com. Liberty, Liberty, Liberty, Liberty. Savings vary. Underwritten by Liberty Mutual Insurance Company and affiliates. Excludes Massachusetts. it's neil oil rich sovereign wealth funds have become a topic de jure of recent years especially as saudi arabia splashes cash around the sports world but yesterday a surprising country jumped into the mega fun game ireland but it's not using oil profits to grow its nest egg remember ireland has been a haven for international companies looking to take advantage of a favorable corporate tax rate.

17:38It slashed from 40 % to 12.5 % back in the late 90s. That has led to around 950 U.S. businesses currently operating in the country, which has caused Ireland's corporate tax income to triple to almost$24 billion within the last eight years. So they are setting up the Future Ireland Fund to capture some of that excess cash and grow it for future generations. Neil, Their finance minister said yesterday that they are targeting a$100 billion fund by the year 2035. That is a lot of Guinness. I didn't know where you're going with it. I know. Yeah, this is, I mean, Ireland dropped its tax rate in the past decade, and it has seen such a windfall in corporate profits.

18:22Dublin is like Silicon Valley 2.0. I mean, Google, Microsoft, any huge tech company you think of is based there so they can take advantage of these taxes. And they are paying so much to the coffers of Ireland. Last year, there were 950 U.S. businesses operating in Ireland. And they employed just under 10 % of all Irish workers. So I'm sure a lot of people listening to this have, you know, they're doing Zoom calls with Ireland because many, many huge U.S. companies are based there to take advantage of this. And it is benefiting Ireland. and whatever Ireland benefits, the U.S. is not getting any of that corporate revenue, income tax revenue.

19:03It is interesting. Some of these stats are just mind-blowing. Just three companies were estimated to pay a third of all corporate tax revenue between 2017 and 2021. Ireland didn't name what those companies were, but you can kind of guess. It's probably Apple, Microsoft, and actually Pfizer has a headquarters over there as well. I do want to talk a little bit about why Ireland is doing this. We did discuss on the show recently about Alaska, how they set up this fund that was in order to preserve some of the oil profits for future generations. Ireland's doing the same thing, but their goal is to future-proof their economy.

19:39So they want to plow money into helping people, helping set up things like public education, infrastructure, and other stuff to raise the standard of living. And it is an interesting departure because in Alaska, we saw them depositing direct stimulus checks into people's accounts. And everyone's like, yes, it's great to get a thousand bucks every year, but it's also would be better if you use these profits to develop things like public infrastructure. So it looks like Ireland's taking the let's just raise society as a whole. Let's use the profits that we're capturing from these mega companies in order to kind of bring up the standard of living.

20:11And they're doing it now because the good times may not last. There is a wave of, you know, there is a movement to raise the corporate tax, have a corporate tax minimum across the world. And that is going into effect sometime soon. And that is going to raise the corporate tax rate to a minimum of 15 percent across all countries. And with Ireland as the main target of this, because the U.S. is saying, look, you had some good times. It's not going to last. So that's why Ireland wants to stash all this money now while the good the times are good. Yeah. OK. Over the past few years, we've been getting a mouthful from retail CEOs about the problem of theft at their stores, specifically pointing to organized retail crime rings that offer a profit motive to swipe things off the shelf.

20:57Well, the Wall Street Journal recently published an article that explores one such crime ring at Home Depot, and the perpetrator is not who you may expect. Robert Dell is a pastor who ran a drug recovery program in St. Petersburg, Florida, but along with helping his patients in rehab, Dell was the mastermind behind a crime network that netted him$3 million in sales since 2016, according to authorities. Here's how it worked, prosecutors say. Dell told people who went to his recovery program to steal tools from Home Depots across Florida and drop them off at his home. This turned out to be the inventory base for his online business.

21:36Under the username Anointed Liquidator on eBay, Dell then sold 10 ,500 of these swiped items from January 2020 until this May, earning him about$1.5 million. After a month's long investigation between Home Depot and law enforcement, Dell and four others, including his wife and mom, were arrested in August. The robberies were apparently so pervasive in the area that after Dell was arrested, the number of deaths at Home Depot stores in the area dropped, the company said. Toby, this is a fascinating story that offers a detailed look at how organized retail crime operates. Yeah. So I want to dig into that a little bit because I did read about what these operations look like.

22:17So Dell is what was known as a fence. So fences kind of are the ones who obtain the supply of goods from these people called boosters. And boosters, as you can imagine, are the people who go in and physically steal the goods from the show. So you can't really have an operation without a booster or a fence. And so Dell was kind of the person pulling the strings, handling the merchandise and selling it on eBay. It was crazy, though, this story, because, I mean, anointed liquidator is such on the nose. He is a pastor, so I can't think of a crazier name to set up your eBay. He was very self-aware.

22:51Yeah, and very successful, too. I mean, this business was bringing in, it brought in$3 million for him. And he had really good reviews because he offered it at lower prices than competitors. Yeah, that is a big part of setting up a successful fence operation, is that you're selling very high quality goods. And so it is a self-fulfilling prophecy where your store gets more and more successful. It has been interesting though to see how law enforcement has been cracking down on these stores because one thing they're doing is looking at stores that sell a high amount of these goods that they know are likely to be stolen.

23:21And so they've had their eye on Dell since 2017, but they had to take some time to piece the case together. They bought some stuff from him and then returned it and checked where it went and it turned out it was his house. Right, I love that from them that they literally tracked a package and yeah it is their job right i guess that is and then to zoom out a little bit um the retailers have definitely been soundingly alarm about what's known as shrink in the business which is the uh loss which is basically theft or other amount of or what happens to its industry that or its inventory sorry that is lost shrink accounted for 112 billion in losses in 2022 which was up from 93 billion the year earlier but that's still on average with levels in 2019 and 2020.

24:05So it seems that on net, this problem that a lot of retailers have been talking about is not necessarily huge or growing massively. I think it's just more front of mind right now, because when we go into a Walgreens, you go into CVS, you see everything behind lock and key. And we've heard about these organized crime rings as well. So even though the top line number might not be much different from years past, it is more top of mind for consumers. All right, Neil, to end the show today, I want to talk about Charles Feeney, who passed away at the age of 92 at the beginning of this week. Now, I would imagine most of you listening hadn't heard of Charles, but he was a very successful pioneer of duty-free shops, as well as a prolific tech investor who at one point amassed an$8 billion fortune.

24:48But the reason we are talking about him is that he's also one of the most prodigious philanthropists pretty much ever. He quietly gave away nearly all his fortune in his lifetime, but not all at the end or at the same time. As he amassed money, he gave it away almost entirely in secret, too. Warren Buffett called him my hero and Bill Gates' hero at a Forbes event in 2014. Charles Feeney Neal, it's one of those guys that you don't know about until you know about, but once you do, he's just an amazing person. Yeah, he was known. He was of Irish ancestry, and he gave a lot to Ireland, and he was known there as the James Bond of philanthropy.