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‘It’s been rough’: passengers weather another day of chaos at US airportsFrom weather disruptions to computer problems to crew shortages, customers are once again caught in travel limbo After an $8bn makeover, New York’s new LaGuardia airport complex is finally an airport the city can be proud of. Unfortunately the same can not be said for the industry it serves.For the second time in almost two weeks thousands of flights were canceled across the US on Wednesday – this time because of what appears to be a snafu with an antiquated computer system. Passengers have had enough.“It’s been rough this last couple of years,” said Deb Alexis, who had traveled to New York from Orlando. “The flight was great but now there’s stress because the bags haven’t come. Seems like there’s a lot of confusion and delays nowadays.”‘A wild Christmas eve’: strangers stranded by airline chaos team up for road tripsRead moreAsked if airline travel is becoming altogether too much trouble, Danny Dividu, on his way to Georgia when his Southwest plane was canceled, said simply: “Hell yes. Now I’ve got to go back upstairs to check in again. I usually go Greyhound. Best way to go. I hate flying. It’s too much hassle, always has been.”Another day, another crisis at US airports.It might have been the cascading weather-related disruptions the US experienced over the holidays, or computer issues, scheduling, pilot or crew shortages but the outcome was familiar: customers left in a helpless state of air travel limbo.Whatever the precise cause of Wednesday’s issues, they are part of a wider set of problems for travelers, airlines and the FAA, said Robert Mann, a former airline executive who now runs the consulting firm RW Mann & Company.“The FAA runs on hardware and software that is in many cases decades old,” he said. “And it’s a multi-year effort to build and install them.”Even a small, regional failure can have knock-on effects for the entire network, he said, but this “seems to be a system failure” and travelers could expect more issues unless something is done.The FAA estimates that delayed and canceled flights cost the US economy $33bn in 2019. “Everyone – the department of transportation, the general accounting office, Congress – agree that there is a significant cost to this but nobody does anything about it,” Mann said.Congress is set to debate the funding of the FAA this year and the hearings are expected to be heated. The FAA is currently without a leader and has been since last March.Biden has nominated Phillip Washington, currently the chief executive of Denver International Airport, to the position. But his nomination has been clouded by criticism of his lack of experience in the aviation industry and ties to a corruption scandal.With Republicans now in charge of the House, Biden’s nomination looks more uncertain and the latest mess will expose the transport secretary, Pete Buttigieg, to more criticism following the chaos at US airports over the holidays.After the flight restrictions were lifted, Buttigieg said his department was not ruling out the possibility that nefarious activity was to blame for the computer system outage.“We’re not prepared to rule that out,” Buttigieg said in an interview on MSNBC. “There is no direct indication of any kind of external or nefarious activity, but we are not yet prepared to rule that out,” Buttigieg said.After the incident senator Ted Cruz, the top Republican on the Senate committee on commerce, science and transportation, called for congressional reforms to the FAA.Southwest Airlines under investigation as more flights canceled after stormRead more“The flying public deserves safety in the sky,” the Texas senator said in a statement. “The administration needs to explain to Congress what happened, and Congress should enact reforms in this year’s FAA reauthorization legislation.”Wednesday’s incident, Cruz added, “highlights why the public needs a competent, proven leader with substantive aviation experience leading the FAA”.By mid-morning, the FAA issued its fifth bulletin. “Normal air traffic operations are resuming gradually across the United States following an overnight outage,” the agency said in a statement.By then, it was too late for many passengers. Jordan Cousins, 25, on his way to Nashville on Southwest from New York’s LaGuardia, said his Southwest flight had been delayed twice and then canceled entirely.“It’s this and then it’s that. You never know. You may have a smooth flight or there may be a problem. It may be at the counter, with the plane, or something,” he said. “Plans never go as planned.”TopicsAirline industryUS politicsNew YorkAir transportfeaturesReuse this content More
US flights resuming after FAA alert system outage causes disruptionThousands of flights delayed because of problem with system that alerts pilots about hazards or changes at airports Domestic flights across the US were temporarily grounded on Wednesday morning, after an IT failure in a critical aviation safety system.The Federal Aviation Administration (FAA) said that the system that alerts pilots and airlines about any hazards was not functioning. The breakdown led to more than 7,800 flights being delayed and 1,200 being canceled , the flight tracking website FlightAware showed. The ground stop was lifted at 9am with the FAA declaring that operations were “resuming gradually across the United States”, but travelers were still left facing another chaotic day of air travel following severe disruptions over the holiday period.“They don’t know what the cause is,” Joe Biden told reporters after speaking to the transportation secretary, Pete Buttigieg. “Aircraft can still land safely, just not take off right now. They don’t know what the cause of it is, they expect in a couple of hours they’ll have a good sense of what caused it and will respond at that time.”The White House said there was no evidence of a cyber-attack but the causes of the IT failure would be investigated in full by the Department of Transportation.International US-bound flights were continuing to take off from Europe and elsewhere.The aviation regulator said its Notam (Notice to Air Missions) system had “failed” and it was working to restore it.It said: “While some functions are beginning to come back on line, National Airspace System operations remain limited.”The FAA said it had “ordered airlines to pause all domestic departures until 9am ET to allow the agency to validate the integrity of flight and safety information”.Jordan Cousins, 25, on his way to Nashville on Southwest Airlines from New York’s LaGuardia, said his flight had been delayed twice and then canceled entirely.“I’ve been here since 7am and this pushes back everything I was trying to do. First I thought it was a cyber-attack, but they said it was some kind of malfunction. So I had all sorts of curiosities,” he said.Crowley said he had noticed that US air travel had become precarious.“Travelling is coming a bit of a hassle. It’s this and then it’s that. You never know. You may have a smooth flight or there may be a problem. It may be at the counter, with the plane, or something,” he said. “Plans never go as planned.”The White House press secretary, Karine Jean-Pierre, said: “There is no evidence of a cyber-attack at this point, but the president directed [the Department of Transportation] to conduct a full investigation into the causes. The FAA will provide regular updates.”Wednesday’s chaos came after a troubled holiday season for air travelers. Bad weather led to the cancellation of thousands of flights, a situation compounded by issues at Southwest Airlines that led to the cancellation of thousands more.More than 20,000 flights were scheduled to depart airports in the US on Wednesday, according to aviation analytics firm Cirium, with almost 2.9m seats.The delays affected carriers around the US. American Airlines, the biggest carrier by volume, said it was working with the FAA to minimise disruption. United Airlines said it had paused all domestic flights.A Notam is a notice containing information essential to personnel concerned with flight operations, but not known far enough in advance to be publicised by other means.Information can go up to 200 pages for long-haul international flights and may include items such as runway closures, general bird hazard warnings or low-altitude construction obstacles.TopicsAir transportUS politicsnewsReuse this content More
Trump, Bankman-Fried and Musk are the monsters of American capitalismRobert ReichFor them, and for everyone who still regards them as heroes, there is no morality in business or economics. The winnings go to the most ruthless If this past week presents any single lesson, it’s the social costs of greed. Capitalism is premised on greed but also on guardrails – laws and norms – that prevent greed from becoming so excessive that it threatens the system as a whole.Yet the guardrails can’t hold when avarice becomes the defining trait of an era, as it is now. Laws and norms are no match for the possibility of raking in billions if you’re sufficiently ruthless and unprincipled.Donald Trump’s tax returns, just made public, reveal that he took bogus deductions to reduce his tax liability all the way to zero in 2020. All told, he reported $60m in losses during his presidency while continuing to pull in big money.Every other president since Nixon has released his tax returns. Trump told America he couldn’t because he was in the middle of an IRS audit. But we now learn that the IRS never got around to auditing Trump during his first two years in office, despite being required to do so by a law dating back to Watergate, stating that “individual tax returns for the president and the vice-president are subject to mandatory review”.Of course, Trump is already synonymous with greed and the aggressive violation of laws and norms in pursuit of money and power. Worse yet, when a president of the United States exemplifies – even celebrates – these traits, they leach out into society like underground poison.Meanwhile, this past week the SEC accused Sam Bankman-Fried of illicitly using customer money from FTX from the beginning to fund his crypto empire.“From the start, contrary to what FTX investors and trading customers were told, Bankman-Fried, actively supported by Defendants, continually diverted FTX customer funds … and then used those funds to continue to grow his empire, using billions of dollars to make undisclosed private venture investments, political contributions, and real estate purchases.”If the charge sticks, it represents one of the largest frauds in American history. Until recently, Bankman-Fried was considered a capitalist hero whose philanthropy was a model for aspiring billionaires (he and his business partner also donated generously to politicians).But like the IRS and Trump, the SEC can’t possibly remedy the social costs that Bankman-Fried has unleashed – not just losses to customers and investors but a deepening distrust and cynicism about the system as a whole, the implicit assumption that this is just what billionaires do, that the way to make a fortune is to blatantly disregard norms and laws, and that only chumps are mindful of the common good.Which brings us to Elon Musk, whose slash-and-burn maneuvers at Twitter might cause even the most rabid capitalist to wince. They also raise questions about Musk’s other endeavor, Tesla. Shares in the electric vehicle maker dropped by almost 9% on Thursday as analysts grew increasingly concerned about its fate. Not only is Musk neglecting the carmaker but he’s appropriating executive talent from Tesla to help him at Twitter. (Tesla stock is down over 64% year-to-date.)Musk has never been overly concerned about laws and norms (you’ll recall that he kept Tesla’s factory in Fremont, California, going during the pandemic even when public health authorities refused him permission to do so, resulting in a surge of Covid infections among workers). For him, it’s all about imposing his gargantuan will on others.Trump, Bankman-Fried and Musk are the monsters of American capitalism – as much products of this public-be-damned era as they are contributors to it. For them, and for everyone who still regards them as heroes, there is no morality in business or economics. The winnings go to the most ruthless. Principles are for sissies.But absent any moral code, greed is a public danger. Its poison cannot be contained by laws or accepted norms. Everyone is forced to guard against the next con (or else pull an even bigger con). Laws are broken whenever the gains from breaking them exceed the penalties (multiplied by the odds of getting caught). Social trust erodes.Adam Smith, the so-called father of modern capitalism, never called himself an economist. He called himself a “moral philosopher,” engaged in discovering the characteristics of a good society. He thought his best book was not The Wealth of Nations, the bible of modern capitalist apologists, but the Theory of Moral Sentiments, where he argued that the ethical basis of society lies in compassion for other human beings.Presumably Adam Smith would have bemoaned the growing inequalities, corruption, and cynicism spawned by modern capitalism and three of its prime exemplars – Trump, Bankman-Fried, and Musk.TopicsUS newsOpinionUS politicsUS taxationDonald TrumpSam Bankman-FriedFTXUS economycommentReuse this content More
For free real time breaking news alerts sent straight to your inbox sign up to our breaking news emails Sign up to our free breaking news emails Borrowing by Rishi Sunak’s government surged to a record £22bn last month following higher interest costs and cost of living payments to households. The Office for National Statistics […] More
FTX seeks to claw back donations to politicians and charitiesCollapsed cryptocurrency exchange had reputation for corporate philanthropy to tune of hundreds of millions of dollars FTX, the collapsed cryptocurrency exchange founded by Sam Bankman-Fried, has started trying to claw back payments made by its former management to politicians, celebrities and charities, as it continues to progress through bankruptcy proceedings in the US.FTX “intends to commence actions before the bankruptcy court to require the return of such payments, with interest accruing from the date any action is commenced”, the company said, sharing an email address – FTXrepay@ftx.us – that recipients could use to voluntarily return money.“Recipients are cautioned that making a payment or donation to a third party (including a charity) in the amount of any payment received from a FTX contributor does not prevent the FTX debtors from seeking recovery from the recipient or any subsequent transferee,” FTX added in a statement.Bankman-Fried, other members of FTX leadership and a number of members of the FTX group all developed reputations for corporate philanthropy to the tune of hundreds of millions of dollars.FTX billionaire Sam Bankman-Fried funneled dark money to RepublicansRead moreHe was one of the largest political donors in the United States, giving directly to Democratic politicians and to Republican causes. Other members of the FTX inner circle were also high-profile donors, such as Ryan Salame, the co-chief executive of FTX’s Bahamian subsidiary.As well as political causes, Bankman-Fried donated large sums to charities, endowing the FTX Foundation and FTX Future Fund to promote his interests.The FTX Foundation had given away $140m (£115m), the organisation reported in October, of which $90m had gone to the Future Fund.In criminal charges filed in the state of New York, the Department of Justice has alleged that the donations were the result of criminal money laundering, since the money was effectively taken from customer accounts.The charges also allege campaign finance violations, arguing that Bankman-Fried “and others known and unknown” broke donation limits by making contributions in the names of other people.Clawing back payments made to politicians and charities is likely to be one of the easier parts of the bankruptcy process.Under US law, payments or transfers made within 90 days of bankruptcy are presumed to be preferential if they result in a creditor getting more than it would have been entitled to at the end of the bankruptcy process, and a “clawback” can attempt to recover the difference in the payments.With FTX, which lost more than $8bn from customer withdrawals in a day less than a week before it declared bankruptcy, there could be billions of dollars that the court decides were distributed unfairly.Retail depositors, however, will be hoping that they aren’t treated as typical creditors. In FTX’s terms of service, the company said depositors didn’t hand over ownership of their deposits, which has led some creditors to argue that the crypto they placed in the exchange should not be used to pay the company’s bills.In another crypto bankruptcy, for BlockFi, a shadow bank that went bust after FTX, the court is now ruling on that question.BlockFi filed a motion on Monday with the New Jersey bankruptcy court arguing: “The BlockFi Wallet terms of service are clear. They provide that ‘title to the cryptocurrency held in your BlockFi Wallet shall at all times remain with you and shall not transfer to BlockFi.’“The debtors have no legal or equitable interest in cryptocurrency that was present in the Wallet accounts as of platform pause, and clients should be able to withdraw such assets from the platform if they choose.”As such, normal retail depositors should be able to withdraw their assets, the shadow bank said.TopicsSam Bankman-FriedFTXCryptocurrenciesE-commerceUS politicsnewsReuse this content More
Warren pushes bipartisan bill to regulate crypto firms after FTX collapseMove co-sponsored by Republican Roger Marshall aims to crack down on money laundering after arrest of Sam Bankman-Fried Elizabeth Warren is pressing Congress to adopt new bipartisan legislation which would force crypto firms to abide by the same regulations as banks and corporations in an attempt to crack down on money laundering through digital assets.The Democratic US senator from Massachusetts is pushing for the new controls on the crypto industry in the wake of the spectacular collapse of the cryptocurrency exchange FTX. On Tuesday its founder and former CEO Sam Bankman-Fried was charged with eight criminal counts including conspiracy to commit money laundering.Five things we know about the collapse of FTX and Sam Bankman-FriedRead moreWarren’s bill is being co-sponsored by the Republican senator from Kansas Roger Marshall. The Digital Asset Anti-Money Laundering Act would essentially subject the world of crypto to the same global financial regulations to which more conventional money markets must conform.Under current systems, crypto exchanges are able to skirt around restrictions designed to stop money laundering and impose sanctions. Should the bill be enacted into law it would authorize the Financial Crimes Enforcement Network (FinCen) to reclassify crypto entities as “money service businesses” which would bring them under basic regulations laid out in the Bank Secrecy Act.In a statement to CNN, Warren said that the “commonsense crypto legislation” would protect US national security. “I’ve been ringing the alarm bell in the Senate on the dangers of these digital asset loopholes,” she said, adding that crypto was “under serious scrutiny across the political spectrum”.Bankman-Fried, 30, was indicted by prosecutors at the southern district of New York and is being held in custody in the Bahamas. The US Securities and Exchange commission (SEC) has also brought civil charges against him, accusing him of creating a firm that was a “house of cards”.An ongoing area of interest to investigators was the vast political contributions made by Bankman-Fried to the Democratic party, as well as to Republicans in the form, he has said, of secretive dark money donations. The Wall Street Journal has calculated that he gave more than $95,000 in direct campaign donations to the same members of the US House financial services committee who are now investigating him.Even before the implosion of FTX, the treasury department was focusing on the feared risks to national security posed by relatively unregulated digital currency exchanges. In August it moved against Tornado Cash, a virtual currency mixer which it accused of laundering more than $7bn in virtual currency since 2019.The Treasury said that Tornado Cash was attractive to launderers of the proceeds of cybercrime, including the Lazarus Group, a hacking group sponsored by North Korea. The entity’s appeal to cybercriminals was that it could move digital assets around anonymously, obscuring the origin and destination of transactions and hiding the parties involved.Warren is a former Harvard law professor and expert on consumer protection and economic inequality. She entered the Senate in 2013, where she established herself as a leading progressive critic of corporate largesse and a spirited opponent of Donald Trump.She made an unsuccessful bid for the White House in 2020.TopicsElizabeth WarrenCryptocurrenciesUS politicsFTXSam Bankman-FriednewsReuse this content More
ExplainerFive things we know about the collapse of FTX and Sam Bankman-FriedCompany founder was arrested and charged with running a ‘house of cards’ in ‘one of the biggest financial frauds in US history’ It has been another crazy 48 hours in the collapse of FTX, once the second-largest cryptocurrency exchange in the world.On Monday, the company’s now-infamous founder, Sam Bankman-Fried, was arrested in the Bahamas, a day before he was set to give testimony before Congress. On Tuesday US authorities issued damning charges that the 30-year-old former billionaire ran a “house of cards” and was behind “one of the biggest financial frauds in American history”.Lawmakers went ahead with the hearing without Bankman-Fried, who was otherwise occupied, in what looks set to be a series of heated hearings about the collapse.Here are five things we learned about FTX after two days of whirlwind of events.1. What happened at FTX appears to be ‘old-school fraud’While FTX was billed as a behemoth of cryptocurrency, with all the technical complexities that implies, officials on Tuesday alleged that FTX’s downfall is a classic case of fraud.Republican representative and incoming House finance committee chair Patrick McHenry said in Tuesday’s hearing that FTX appears to be “old school fraud, just using new technology”.In a statement, Gary Gensler, chair of the Securities and Exchange Commission (SEC), which charged Bankman-Fried of fraud against investors, echoed this sentiment by saying Bankman-Fried “built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.“FTX operated behind a veneer of legitimacy,” he said. “But we allege in our complaint that the veneer wasn’t just thin, it was fraudulent.”John Ray III, FTX’s current CEO who was brought in to restructure the company, called it “really old-fashioned embezzlement” when testifying in front of the House Financial Services Committee on Tuesday.When asked to contrast the liquidation of Enron in the early 2000s, which Ray oversaw, he said the crimes of the former energy giant were “highly orchestrated financial machinations by highly sophisticated people to keep transactions off balance sheets”.FTX, in contrast, was “just taking money from customers, and using it for your own purpose,” he said. “Not sophisticated at all.”2. Little is known about where all the money wentRay told lawmakers that there is an “excess of $7bn” in lost FTX funds from 7.6m accounts, with 2.7m based in the US. It is unclear exactly how much money is lost.“There were no corporate controls, no corporate oversight, no independent board,” he said. “The owners, business and senior management had virtual control of all the accounts and could move money or assets as they desired, undetected by customers.”Ray said he had “never seen such an utter lack of record keeping” and there were “absolutely no internal control whatsoever”. FTX – which helped Bankman-Fried amass a personal fortune once valued at $26bn – used QuickBooks to manage its finances. “QuickBooks, very nice tool, not for a multibillion-dollar company,” Ray said.3. Prosecutors believe Bankman-Fried was lying from the beginningWhile Bankman-Fried built a reputation off his philosophy of effective altruism, saying he wanted to use his wealth to make a major positive impact on the world, prosecutors are alleging that Bankman-Fried was defrauding investors since he founded FTX in 2019.“Bankman-Fried was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the SEC said in its complaint.The complaint describes how Bankman-Fried postured himself as a “responsible leader of the crypto community” and “touted the importance of regulation and accountability”.“But from the start, Bankman-Fried improperly diverted customer assets to his privately-held crypto hedge fund, Alameda Research LLC, and then used those customer funds to make undisclosed venture investments, lavish real estate purchases, and large political donations,” the complaint reads.4. What’s next for Bankman-Fried?The criminal indictment that led to Bankman-Fried’s arrest was unsealed on Tuesday, revealing exactly what charges federal prosecutors have charged him with.Bankman-Fried faces eight criminal counts, including wire fraud on customers and lenders, conspiracies to commit wire fraud on customers and lenders and conspiracies to commit commodities fraud, securities fraud and money laundering.Bankman-Fried could face hefty prison time for the charges but legal experts say it is too early to say yet what sentence he will receive if convicted. Sentencing in white-collar crime is highly influenced by the scale of the fraud, said Duncan Levin, managing partner at Levin & Associates and a former federal prosecutor. Given that FTX’s losses “seem to be close to $2bn, that could drive sentencing to the absolute max,” he said.But at the moment, said Levin, it’s hard to say whether if convicted Bankman-Fried is facing an “Elizabeth Holmes [11 years] or a Bernie Madoff [150 years]”.5. Prosecutors are likely closing in on Bankman-Fried’s inner circle – and the scandal is spreadingThough Bankman-Fried is the only FTX associate who has been charged, US authorities are investigating others who were involved with the company.At a press conference Damian Williams, United States attorney for the southern district of New York, said this was only the beginning. “This investigation is very much ongoing,” he said. “We are not done.” Officials advised anyone involved in the alleged fraud “to come to us before we come to you”.But while US authorities are after FTX insiders, Washington faces its own reckoning. Bankman-Fried and his peers gave millions to politicians of both sides in the hope of steering crypto regulation. The political fallout of FTX’s collapse looks set to be one of the big stories of 2023.TopicsSam Bankman-FriedFTXCryptocurrenciesUS politicsexplainersReuse this content More
