More stories

  • in

    Wisconsin Supreme Court Says Governor’s 400-Year Edit Was Within Veto Authority

    Gov. Tony Evers, a Democrat, used his veto power to increase school funding limits for four centuries longer than Republican lawmakers in the state had intended.The sentence, dull but clear, was buried 158 pages into Wisconsin’s budget.“For the limit for the 2023-24 school year and the 2024-25 school year,” the sentence read when it was passed by the Republican-controlled Legislature, “add $325” to the amount school districts could generate through property taxes for each student.But by the time Gov. Tony Evers, a Democrat, and his veto pen were finished, it said something else entirely: “For the limit for 2023-2425, add $325.”It was clever. Creative. Perhaps even a bit subversive, extending the increase four centuries longer than lawmakers intended. But was it legal?On Friday, the Wisconsin Supreme Court said yes. In a 4-to-3 ruling in a lawsuit challenging Mr. Evers’s use of his partial veto authority, the court’s liberal majority said the governor had acted legally. The three conservative justices on the court dissented.“We uphold the 2023 partial vetoes, and in doing so we are acutely aware that a 400-year modification is both significant and attention-grabbing,” Justice Jill J. Karofsky wrote in the majority opinion. “However, our Constitution does not limit the governor’s partial veto power based on how much or how little the partial vetoes change policy, even when that change is considerable.”The proposed state budget had outlined two years of revenue limit increases, for the 2023-24 and 2024-25 school years. By editing out the text in red, Mr. Evers allowed increases until 2425.State of WisconsinWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • in

    A Musk Lawsuit in Wisconsin Is the Backdrop to the State’s Supreme Court Race

    A legal battle over Tesla sales in Wisconsin is the quiet backdrop to a big State Supreme Court race.I was driving from Eau Claire, Wis., to Minneapolis last week when I saw the sign.A Tesla sign.Soon after I crossed the St. Croix River, which divides Wisconsin and Minnesota, a brick-and-steel tower visible from Interstate 94 advertised the Tesla store and service center in Lake Elmo, Minn.The dealership’s proximity to the state line is probably no accident: Wisconsin law prohibits vehicle manufacturers from selling cars directly to customers there, the way Tesla usually does. Instead, companies need to work through local franchisees — think Hank’s Ford or Jimmy’s Subaru, that sort of thing.This means that, in Wisconsin, you can’t actually stroll into a dealership and leave with a Tesla. You can look at one — the company has showrooms in Madison and Milwaukee — but if you want one, you’ll generally have to buy it online and pick it up somewhere like Lake Elmo or Northern Illinois, or have it delivered.Tesla sued Wisconsin over this law in January. Now, Tesla’s owner, Elon Musk, is spending big money on the state’s Supreme Court race.The lawsuit has become a major focus for Democrats, who are accusing Musk of trying to buy a justice and swing the very court that might at some point consider his lawsuit. My colleagues Reid Epstein, who writes about national politics, and Neal Boudette, who covers the auto industry, teamed up to explore the relationship between the lawsuit and Musk’s $20 million investment — so far — in the judicial election, which will be held on April 1.The politics of Tesla’s fight with Wisconsin are, like so much involving Musk, kind of topsy-turvy. It pits car dealers, who tend to be Republican, against Musk supporters, who these days also tend to be Republican.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • in

    Who Might Be the Next Chair of the Democratic Party?

    The current leader of the Democratic National Committee, Jaime Harrison, won’t seek re-election. His successor will need to revive a distressed party.As the Democratic Party reels from devastating losses — in the presidential contest, the race to control the Senate and its bid to regain control of the House — its national committee is searching for a new chair. Whoever lands that critical role will be charged with shepherding the party out of the woods and into a new era.Jaime Harrison, the current chair of the Democratic National Committee, has decided not to seek re-election. The party’s 448 committee members, who include party officials and politicians from across the country, are expected to vote on his replacement on Feb. 1.Two contenders have already entered the race. Several others have either suggested publicly that they are considering a run, or are quietly holding conversations with party members to gauge potential support. The private deliberations were described by several people who have participated in them and insisted on anonymity.Here’s a look at the Democrats in the mix.Who’s already joined the race?Martin O’MalleyMr. O’Malley, a former governor of Maryland and a Democratic presidential candidate in 2016, was the race’s first entrant.He has a long record of public service, getting his start on the Baltimore City Council before becoming the city’s mayor in 1999. During his tenure as governor, an office he held from 2007 to 2015, he led the Democratic Governors Association.In 2023, President Biden tapped him to lead the Social Security Administration. Mr. O’Malley has said he will resign from the post on Friday.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • in

    Former Waupun Prison Warden and 8 Employees Charged in Inmate Deaths

    Inmates had complained about a monthslong lockdown that cut them off from family members and timely medical care.The former warden of a Wisconsin prison and eight other prison employees were charged on Wednesday in connection with multiple inmate deaths over the last year, the local sheriff said.The prison, Waupun Correctional Institution, about 70 miles northwest of Milwaukee, was the subject of a 2023 report by The New York Times and Wisconsin Watch that found that inmates had been confined to their cells for months and denied access to medical care.The prison’s former warden, Randall Hepp, had left his job earlier this week. He was charged with misconduct in public office, a felony. Mr. Hepp’s arrest was first reported by The Associated Press. His attorney could not immediately be reached for comment.The other prison employees, most of whom worked as correctional officers and registered nurses, were charged with abuse of an inmate. Two of the correctional officers and a sergeant were also charged with misconduct.In announcing the arrests during a Wednesday news conference, Dale J. Schmidt, the sheriff for Dodge County, Wis., said Mr. Hepp and the other employees had failed to adequately care for inmates in their custody. Sheriff Schmidt described in detail four deaths, including one involving a prisoner who had not eaten in days and was “drinking sewage water” and “played in the toilet.” The medical examiner said the cause of death was malnutrition and probable dehydration, and ruled it a homicide.Randall Hepp, former warden of Waupun Correctional Institution.Dodge County (Wis.) Sheriff’s OfficeDo you, or does anyone you know, work for the Wisconsin Department of Corrections?

    We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • in

    ‘Fix the Damn Roads’: How Democrats in Purple and Red States Win

    When Gov. Josh Shapiro of Pennsylvania got an emergency call about I-95 last June, his first thought turned to semantics. “When you say ‘collapse,’ do you really mean collapse?” he recalled wondering. Highways don’t typically do that, but then tractor-trailers don’t typically flip over and catch fire, which had happened on an elevated section of the road in Philadelphia.Shapiro’s second, third and fourth thoughts were that he and other government officials needed to do the fastest repair imaginable.“My job was: Every time someone said, ‘Give me a few days, and I’ll get back to you,’ to say, ‘OK, you’ve got 30 minutes,’” he told me recently. He knew how disruptive and costly the road’s closure would be and how frustrated Pennsylvanians would get.But he knew something else, too: that if you’re trying to impress a broad range of voters, including those who aren’t predisposed to like you, you’re best served not by joining the culture wars or indulging in political gamesmanship but by addressing tangible, measurable problems.In less than two weeks, the road reopened.Today, Shapiro enjoys approval ratings markedly higher than other Pennsylvania Democrats’ and President Biden’s. He belongs to an intriguing breed of enterprising Democratic governors who’ve had success where it’s by no means guaranteed, assembled a diverse coalition of supporters and are models of a winning approach for Democrats everywhere. Just look at the fact that when Shapiro was elected in 2022, it was with a much higher percentage of votes than Biden received from Pennsylvanians two years earlier. Shapiro won with support among rural voters that significantly exceeded other Democrats’ and with the backing of 14 percent of Donald Trump’s voters, according to a CNN exit poll that November.Biden’s fate this November, Democratic control of Congress and the party’s future beyond 2024 could turn, in part, on heeding Shapiro’s and like-minded Democratic leaders’ lessons about reclaiming the sorts of voters the party has lost.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • in

    Wisconsin Supreme Court Election: Protasiewicz Wins With Abortion Message

    Janet Protasiewicz prevailed in the state’s highly consequential contest for the Supreme Court, which will now be likely to reverse the state’s abortion ban and end the use of gerrymandered legislative maps.MILWAUKEE — Wisconsin voters on Tuesday chose to upend the political direction of their state by electing a liberal candidate to the State Supreme Court, flipping majority control from conservatives, according to The Associated Press. The result means that in the next year, the court is likely to reverse the state’s abortion ban and end the use of gerrymandered legislative maps drawn by Republicans.Janet Protasiewicz, a liberal Milwaukee County judge, defeated Daniel Kelly, a conservative former Wisconsin Supreme Court justice who sought a return to the bench. With more than 75 percent of votes counted, Judge Protasiewicz led by more than 10 percentage points, though the margin was expected to narrow as rural counties tallied ballots.“Our state is taking a step forward to a better and brighter future where our rights and freedoms will be protected,” Judge Protasiewicz told jubilant supporters at her victory party in Milwaukee.The contest, which featured over $40 million in spending, was the most expensive judicial election in American history. Early on, Democrats recognized the importance of the race for a swing seat on the top court in one of the country’s perennial political battlegrounds. Millions of dollars from out of state poured into Wisconsin to back Judge Protasiewicz, and a host of national Democratic groups rallied behind her campaign.Judge Protasiewicz, 60, shattered long-held notions of how judicial candidates should conduct themselves by making her political priorities central to her campaign. She made explicit her support for abortion rights and called the maps, which gave Republicans near-supermajority control of the Legislature, “rigged” and “unfair.”Her election to a 10-year term for an officially nonpartisan seat gives Wisconsin’s liberals a 4-to-3 majority on the court, which has been controlled by conservatives since 2008. Liberals will hold a court majority until at least 2025, when a liberal justice’s term expires. A conservative justice’s term ends in 2026.As the race was called Tuesday night, the court’s three sitting liberal justices embraced at Judge Protasiewicz’s election night party in Milwaukee, as onlookers cried tears of joy. During her speech, the judge and the other three liberal justices clasped their hands together in the air in celebration.“Today’s results mean two very important and special things,” Judge Protasiewicz said. “First, it means that Wisconsin voters have made their voices heard. They have chosen to reject partisan extremism in this state. And second, it means our democracy will always prevail.”Justice Kelly, 59, evinced the bitterness of the campaign with a testy concession speech that acknowledged his defeat and portended doom for the state. He called his rival’s campaign “truly beneath contempt” and decried “the rancid slanders that were launched against me.”“I wish that I’d be able to concede to a worthy opponent, but I do not have a worthy opponent,” Justice Kelly told supporters in Green Lake, Wis. He had not called Judge Protasiewicz by the time she delivered her victory remarks.He concluded the final speech of his campaign by saying, “I wish Wisconsin the best of luck, because I think it’s going to need it.”Judge Protasiewicz made a calculation from the start of the race that Wisconsin voters would reward her for making clear her positions on abortion rights and the state’s maps — issues most likely to animate and energize the base of the Democratic Party.In an interview at her home on Tuesday before the results were known, Judge Protasiewicz (pronounced pro-tuh-SAY-witz) attributed her success on the campaign trail to the decision to inform voters of what she called “my values,” as opposed to Justice Kelly, who used fewer specifics about his positions.“Rather than reading between the lines and having to do your sleuthing around like I think people have to do with him, I think I would rather just let people know what my values are,” she said. “We’ll see tonight if the electorate appreciates that candor or not.”Over the last dozen years, the court has served as an important backstop for Wisconsin Republicans. It certified as constitutional Gov. Scott Walker’s early overhauls to state government, including the Act 10 law that gutted public employee unions, as well as voting restrictions like a requirement for a state-issued identification and a ban on ballot drop boxes.In 2020, Wisconsin’s Supreme Court was the only one in the country to agree to hear President Donald J. Trump’s challenge to the presidential election. Mr. Trump sought to invalidate 200,000 ballots from the state’s two largest Democratic counties. The Wisconsin court rejected his claim on a 4-to-3 vote, with one of the conservative justices siding with the court’s three liberals on procedural grounds.That key vote gave this year’s court race extra importance, because the justices will weigh in on voting and election issues surrounding the 2024 election. Wisconsin, where Mr. Trump’s triumph in 2016 interrupted a string of Democratic presidential victories going back to 1988, is set to again be ferociously contested.The court has acted in Republicans’ interest on issues that have received little attention outside the state.In 2020, a year after Gov. Tony Evers, a Democrat, succeeded Mr. Walker, conservative justices agreed to limit his line-item veto authority, which generations of Wisconsin governors from both parties had used. Last year, the court’s conservatives allowed a Walker appointee whose term had expired to remain in office over Mr. Evers’s objection.Once Judge Protasiewicz assumes her place on the court on Aug. 1, the first priority for Wisconsin Democrats will be to bring a case to challenge the current legislative maps, which have given Republicans all but unbreakable control of the state government in Madison.Jeffrey A. Mandell, the president of Law Forward, a progressive law firm that has represented Mr. Evers, said he would file a legal request for the Supreme Court to hear a redistricting case the day after Judge Protasiewicz is seated.“Pretty much everything problematic in Wisconsin flows from the gerrymandering,” Mr. Mandell said in an interview on Tuesday. “Trying to address the gerrymander and reverse the extreme partisan gerrymandering we have is the highest priority.”The state’s abortion ban, which was enacted in 1849, seven decades before women could vote, is already being challenged by Josh Kaul, Wisconsin’s Democratic attorney general. This week, a circuit court in Dane County scheduled the first oral arguments on Mr. Kaul’s case for May 4, but whichever way a county judge rules, the case is all but certain to advance on appeal to the State Supreme Court later this year.Dan Simmons More

  • in

    2023’s Biggest, Most Unusual Race Centers on Abortion and Democracy

    The election for a swing seat on Wisconsin’s Supreme Court has huge policy stakes for the battleground state. Cash is pouring in, and some of the candidates have shed any pretense of judicial neutrality.In 10 weeks, Wisconsin will hold an election that carries bigger policy stakes than any other contest in America in 2023.The April race, for a seat on the state’s evenly divided Supreme Court, will determine the fate of abortion rights, gerrymandered legislative maps and the governor’s appointment powers — and perhaps even the state’s 2024 presidential election if the outcome is again contested.The court’s importance stems from Wisconsin’s deadlocked state government. Since 2019, Gov. Tony Evers, a Democrat, has faced off against a Republican-controlled Legislature with near-supermajority control thanks to one of the country’s most aggressive partisan gerrymanders, itself approved last year by the Wisconsin justices.Wisconsin’s Supreme Court has been left to arbitrate a host of thorny issues in the state, and has nearly always sided with Republicans. But now, with a conservative justice retiring, liberals hope to reverse many of those decisions by taking control of the open seat and its 10-year term.“If you change control of the Supreme Court from relatively conservative to fairly liberal, that will be a big, big change and that would last for quite a while,” said David T. Prosser Jr., a conservative former justice who retired from the court in 2016.The contest will almost certainly shatter spending records for a judicial election in any state, and could even double the current most expensive race. Wisconsinites are set to be inundated by a barrage of advertising, turning a typically sleepy spring election into the latest marker in the state’s nonstop political season. The seat is nonpartisan in name only, with officials from both parties lining up behind chosen candidates.Indeed, the clash for the court is striking because of how nakedly political it is.While past state judicial candidates and United States Supreme Court nominees have largely avoided weighing in on specific issues — instead pitching opaque judicial philosophies and counting on voters or senators to read between the lines — some of the Wisconsin contenders are making all but explicit arguments for how they would rule on topics that are likely to come before the court.Judge Janet Protasiewicz has argued that abortion should be “a woman’s right to choose.”Caleb Alvarado for The New York TimesJanet Protasiewicz, a liberal county judge from a Milwaukee suburb, is leading the charge on both fund-raising and the new approach to judicial campaigning, shedding the pretense that she does not hold firm positions on the hottest-button issues. She turned heads this month at a candidate forum when she declared the state’s gerrymandered legislative maps “rigged.”In an interview last week, Judge Protasiewicz argued that abortion should be “a woman’s right to choose”; said that Gov. Scott Walker’s 2011 law effectively ending collective bargaining rights for most public employees was unconstitutional; and predicted that, if she won, the court would take up a case seeking to invalidate the Republican-drawn state legislative and congressional maps put in place last year.Politics Across the United StatesFrom the halls of government to the campaign trail, here’s a look at the political landscape in America.2023 Races: Governors’ contests in Kentucky, Louisiana and Mississippi and mayoral elections in Chicago and Philadelphia are among the races to watch this year.Voting Laws: The tug of war over voting rights is playing out with fresh urgency at the state level, as Republicans and Democrats seek to pass new laws before the next presidential election.A Key Senate Contest: Representative Ruben Gallego, a progressive Democrat, said that he would run for the Senate in 2024 in a potential face-off with Senator Kyrsten Sinema.Democrats’ New Power: After winning trifectas in four state governments in the midterms, Democrats have a level of control in statehouses not seen since 2009.“Obviously, if we have a four-to-three majority, it is highly likely that we would be revisiting the maps,” she said.The other liberal candidate, Judge Everett Mitchell of Dane County, which includes Madison, the state capital, said in an interview that “the map lines are not fair.”Both candidates have also expressed full-throated support for the right to an abortion, which became illegal last summer under a law that was enacted in 1849 but that is being challenged by the state’s Democratic attorney general in a case likely to come before the court this year.Their declarations signify how the race is transmogrifying into a statewide election like any other in Wisconsin, a perpetual political battleground. Like November’s contests for governor, state attorney general and the Senate, the court election is set to be dominated by a focus on abortion rights (for Democrats) and crime (for Republicans).“We’re still on the November hangover where the top two issues were crime and abortion,” said Mark Graul, a Republican political operative in the state who is a volunteer for Jennifer R. Dorow, a conservative Waukesha County judge in the Supreme Court race. Judge Dorow presided over the trial last fall of a man convicted of killing six people by driving through a 2021 Christmas parade.Jennifer R. Dorow, a conservative Waukesha County judge, presided over the trial last fall of a man convicted of killing six people by driving through a 2021 Christmas parade.Caleb Alvarado for The New York TimesJudge Dorow and another conservative, Dan Kelly, a former Wisconsin Supreme Court justice who lost a 2020 election to retain his seat, will compete against the two liberals in an officially nonpartisan Feb. 21 primary to replace Justice Patience D. Roggensack, who is retiring.The top two will advance to an April 4 general election, with the winner joining a court that is otherwise split between three conservative and three liberal justices.In narrowly divided Wisconsin, a one-seat edge is all the majority needs to change the state’s politics.In recent years, in addition to approving the Republican-drawn maps, the court has ruled that most drop boxes for absentee ballots are illegal; struck down Mr. Evers’s pandemic mitigation efforts; stripped regulatory powers from the state schools superintendent, a Democrat; allowed political appointees of Mr. Evers’s Republican predecessor to remain in office long past the expiration of their terms; and required some public schools to pay for busing for parochial schools.Many of those cases, which Democrats hope to roll back, were brought to the court by the Wisconsin Institute for Law and Liberty, a think tank and legal organization that has served as the leading edge of the state’s conservative movement. The group’s founder, Rick M. Esenberg, said the court’s role ought to be upholding laws precisely as legislators have written them — not proposing major changes to them.“Having control of the judiciary shouldn’t mean that you can make new policy,” Mr. Esenberg said. “Some judicial candidates have spoken as if that’s exactly what’s at stake. And for them, it may well be.”The conservative candidates, Justice Kelly and Judge Dorow, have been less forthright about how they would rule, but both have left ample clues for voters. Justice Kelly last year participated in an “election integrity” tour sponsored by the Republican Party of Wisconsin. Judge Dorow, who was so well known in the Milwaukee suburbs that people dressed as her last Halloween, said in a 2016 legal questionnaire that the worst U.S. Supreme Court decision was Lawrence v. Texas, the 2003 decision that struck down anti-sodomy laws.From left, Judge Dorow, Dan Kelly, Everett Mitchell and Judge Protasiewicz at a forum in Madison this month.John Hart/Wisconsin State Journal, via Associated PressBoth have ties to former President Donald J. Trump. In 2020, Mr. Trump endorsed Justice Kelly and praised him at a Milwaukee rally. Judge Dorow’s husband, Brian Dorow, was a security official for Trump campaign events in Wisconsin. Neither Justice Kelly nor Judge Dorow agreed to be interviewed.The race has already broken state fund-raising records for a judicial race. Judge Protasiewicz — whose campaign on Tuesday released a cheeky video teaching Wisconsinites how to say her name: pro-tuh-SAY-witz — raised $924,000 last year, more than any Wisconsin Supreme Court candidate ever in the year before an election. Judge Dorow and Justice Kelly each raised about one-third as much, while Judge Mitchell collected $115,000.Far more money will flow in from outside groups and the state’s political parties, which have no limits on what they may receive and spend. Both parties are expected to direct tens of millions of dollars to their favored general election candidates.Justice Kelly has the support of the billionaire Uihlein family, whose political action committee pledged last year to spend millions of dollars on his behalf. So far, the Uihleins’ contributions have amounted to just $40,000 — a pair of maximum individual contributions to his campaign. Last year the Uihlein-backed super PAC spent $28 million in Wisconsin’s Senate race; Richard and Liz Uihlein contributed an additional $2.8 million to the state Republican Party.Dan Curry, a spokesman for Fair Courts America, the Uihleins’ political action committee, declined to answer questions about the family’s spending plans in the Supreme Court race.The enormous stakes in the race so far have not been matched by commensurate public interest. Marquette University Law School, which conducts Wisconsin’s most respected political polls, has no plans to survey voters about the Supreme Court election, said Charles Franklin, the poll’s director.Ben Wikler, the chairman of the Democratic Party of Wisconsin, said there was no question that spending on the race would eclipse the most expensive U.S. judicial race on record, a $15 million campaign in 2004 for the Illinois Supreme Court, according to the Brennan Center for Justice.Mr. Wikler, who has spent recent weeks stumping for cash from major Democratic donors, said he hoped to make the race a national cause célèbre for liberals along the lines of Jon Ossoff’s 2017 House campaign in Georgia or the referendum on abortion rights in Kansas last year.Last year, the Wisconsin Supreme Court ruled that most drop boxes for ballots were illegal, a decision that could be revisited with a new justice.Lauren Justice for The New York TimesHe cited the court’s 4-to-3 ruling in December 2020 that rejected the Trump campaign’s effort to invalidate 200,000 votes cast in Milwaukee County and Dane County — an argument that has resonated with top Democrats in Washington worried that a more conservative court could reach an opposite conclusion in the future.“Wisconsin is extremely important for the presidency,” Senator Chuck Schumer of New York, the majority leader, said in an interview. “The Supreme Court is the firewall to an extreme Legislature that wants to curtail voting rights. And so this election is very important, not just for Wisconsin, but for the country.”Eric H. Holder Jr., the former attorney general who leads the National Democratic Redistricting Committee, plans to campaign in the state after the primary.For Wisconsin Democrats, the election is an opportunity to imagine a world in which they can exert some control over policy rather than simply trying to block Republican proposals, after a dozen years of playing defense.In an interview last month, Mr. Evers called the race “a huge deal.” His election lawyer, Jeffrey A. Mandell, said that if a liberal candidate won, Mr. Mandell would ask the State Supreme Court to take direct action to invalidate the state’s legislative maps on Aug. 2, the day after the new justice is seated.Kelda Roys, a Democratic state senator, said the campaign would focus almost entirely on abortion rights — because the next justice will be in position to overturn the state’s ban and because, she argued, the midterms showed that it was a winning issue.“It’s going to be abortion morning, noon and night,” Ms. Roys said, “even more than November was.”Kitty Bennett More

  • in

    FTX’s Near-Collapse Batters the Crypto Industry

    Prices of digital currencies have tumbled even after the exchange FTX announced a provisional lifeline by a top rival, Binance. A humbling downfall for Sam Bankman-Fried.Erika P. Rodriguez for The New York TimesA crypto giant’s fate is in doubtDevastation in the crypto market continued on Wednesday, after the giant crypto exchange Binance announced a bombshell deal to buy its embattled rival, FTX. (The deal excludes FTX’s American operations.) The entire market’s capitalization now stands at $900 billion, down from $3 trillion just one year ago, while major cryptocurrencies were down by double-digit percentages. The damage is largely contained within crypto; both the S&P 500 and the Nasdaq closed up yesterday.But investors fear that Binance won’t go through with the rescue plan, and that more pain awaits after their industry’s biggest Lehman-esque moment to date.What happened? Binance, an early investor in FTX turned rival, said over the weekend that it planned to sell its holdings in FTT, a token used for trading on FTX’s platform — a stunning move that cast doubt on the financial health of FTX and its trading arm, Alameda Research. The token’s value has plunged by roughly 80 percent in the past 36 hours to just under $5.Traders withdrew over $1.2 billion from FTX on Monday alone, according to the research firm Nansen. By Tuesday, FTX had stopped processing withdrawals; its chief executive, Sam Bankman-Fried, who was reportedly casting about for a financial lifeline from billionaires, finally turned to Binance for salvation.Binance has cemented its dominance over crypto. It was already the largest exchange worldwide for digital currencies and derivatives; FTX’s trading volumes in September were just a fraction of Binance’s. Its founder, Changpeng Zhao — widely known as CZ — showed off his power by effectively kneecapping FTX and then swooping in with a rescue. “This elevates Zhao as the most powerful player in crypto,” Ilan Solot of the derivatives trader Marex Solutions told The Financial Times.It’s a humbling downfall for Bankman-Fried, who in just three years rocketed from obscurity to become one of the best-known moguls in crypto, earning comparisons to Warren Buffett and J.P. Morgan. Months ago, Bankman-Fried sought to live up to the Morgan comparison, swooping in to bail out troubled crypto companies like Celsius and Voyager Digital (deals whose status is now unclear); he also became a frequent presence in Washington, calling for more regulation of the crypto industry, to the ire of CZ and other executives.At the beginning of the year, FTX was valued at $32 billion, backed by heavyweight investors like BlackRock, SoftBank and Tiger Global. (Investors said yesterday they were blindsided by the deal.) The 30-year-old Bankman-Fried — known in the crypto world as S.B.F. — was said to have a net worth of over $16 billion. But a document leaked to CoinDesk purportedly showed that FTX and Alameda, whose finances had long been murky, were highly illiquid and financially vulnerable.The crypto world fears other shoes will drop. Investors worry that CZ may yet pull out of his rescue deal: He noted on Tuesday that the transaction was nonbinding and subject to due diligence. Meanwhile, tokens associated with FTX, including Solana, have continued to plunge in value.Other crypto players sought to distance themselves from the FTX meltdown. Brian Armstrong of Coinbase, the biggest U.S.-focused exchange, said FTX’s troubles appeared to arise from “risky business practices” that his company doesn’t engage in. Still, Coinbase shares fell nearly 11 percent yesterday.And regulators say the news justifies more scrutiny of crypto companies. “This is a major market event for the digital asset sector,” said Joe Rotunda of the Texas State Securities Board Enforcement Division, which had already been investigating FTX.HERE’S WHAT’S HAPPENING Elon Musk sells billions more in Tesla stock to pay for his Twitter deal. He sold nearly $4 billion worth of shares in recent days, according to regulatory filings, bringing his total sales for the year to $36 billion. The electric carmaker’s shares were up slightly in premarket trading.The United Nations seeks to end “sham” corporate net-zero pledges. Companies that claim to be trying to cut carbon emissions but invest in fossil fuels should be shamed, António Guterres, the U.N. secretary general, said at COP27. Meanwhile, more rich countries pledged to pay poorer ones compensation for damage from climate change.Disney reports a jump in streaming losses. The media giant said its direct-to-consumer unit — including Disney+ — doubled its third-quarter losses from a year ago, to $1.5 billion. But Disney said the quarter was the “peak” for losses, and noted it had added 12 million new subscribers.TikTok lowers its worldwide revenue targets amid a spending slump. The video platform cut its sales goals by 20 percent after its advertising and e-commerce operations struggled, The Financial Times reports. TikTok also revamped its leadership in the United States.Adidas cuts its profit forecast after breaking from Kanye West. The warning from the sportswear giant came weeks after it ended its highly profitable collaboration with the rapper now known as Ye. Separately, Adidas named Bjorn Gulden, the former head of Puma, as its next C.E.O.The red wave that wasn’t Republicans haven’t quite had the night they expected. As of 7 a.m. Eastern, Republicans were 21 seats shy of retaking control of the House. But leadership of the Senate remains up in the air after the Democrats flipped a seat in Pennsylvania. Here are the big highlights so far:Pennsylvania: John Fetterman, the state’s Democratic lieutenant governor, beat Mehmet Oz in the closely watched Senate race. Political analysts now say Democrats need to win two of three hotly contested Senate races — in Georgia, Arizona and Nevada, all currently held by Democrats — to maintain power in the chamber.Georgia: The Senate contest looks like it’s headed for a runoff on Dec. 6, pitting the incumbent, Raphael Warnock, against his Republican challenger, Herschel Walker.Governor races: Voters backed high-profile incumbents, including Kathy Hochul, Democrat of New York; Greg Abbott, Republican of Texas; and Tony Evers, Democrat of Wisconsin.Ballot initiatives: Voters in Michigan approved making abortion access a right protected under the State Constitution. Those in Maryland and Missouri voted to legalize marijuana, though similar measures were rejected in Arkansas and North Dakota.A rough night for Donald Trump: Several candidates that he endorsed, including in Arizona, Georgia, Michigan and Pennsylvania, lost or were behind. And a potential rival for the 2024 Republican presidential nomination, Gov. Ron DeSantis of Florida, handily won re-election.Meta slices through its work forceFacebook’s owner Meta will lay off 11,000 employees, equivalent to 13 percent of its work force, the company announced on Wednesday morning, in the biggest restructuring in the social media giant’s history. A slump in digital advertising and ballooning losses from its pivot to the metaverse have pushed the company to make a series of wide-ranging cuts.In a note to employees, Mark Zuckerberg, Meta’s co-founder and C.E.O., admitted that the company had hired too aggressively during the pandemic as homebound consumers spent more time socializing and shopping online. Meta mistakenly assumed this trend would continue: “I got this wrong, and I take responsibility for that,” he wrote.The company has begun cutting costs across its operations, “scaling back budgets, reducing perks, and shrinking our real estate footprint,” Zuckerberg wrote. The stock was up 3.7 percent in premarket trading, outperforming the Nasdaq.The economic downturn is forcing companies across industries to shrink. Citigroup and Barclays are expected to lay off hundreds in their investment banking units, Bloomberg reports. And, according to Protocol, Salesforce could cut as many as 2,500 positions in the coming weeks as the activist investor Starboard Value seeks big changes in corporate strategy.Exclusive: Keurig Dr Pepper buys stake in Athletic Brewing Keurig Dr Pepper has invested $50 million in Athletic Brewing, the nonalcoholic beer company, as part of a $75 million fund-raise by Athletic, DealBook is first to report. It’s the beverage giant’s second foray into the nonalcoholic booze category — it announced a deal to acquire a nonalcoholic cocktail brand called Atypique this summer — and another sign of interest in this fast-growing category.Athletic Brewing was founded in 2017 by Bill Shufelt, a former trader at the hedge fund Point72, and John Walker, a former craft brewer. It now sells its products — including lager, light beer and sparkling water — at retailers like Trader Joe’s. With its new backer, Athletic is looking to expand in Australia, France and Spain.Sales of nonalcoholic beer are skyrocketing, growing almost 70 percent between 2016 and 2021 in the U.S., to about $670 million, according to Euromonitor. While that is still a tiny portion of the overall beer market, its popularity stands in stark contrast to overall sluggishness in beer sales, as the younger generation drinks less and cares more about its waistline. Beer giants like Heineken, Budweiser and Sam Adams have released nonalcoholic alternatives in the last five years.It’s not just for recovering alcoholics or nondrinkers. Shufelt said 80 percent of his customers drink alcohol, and three-fourths are between the ages of 21 and 44. About half are women, he added.THE SPEED READ DealsThe E.U.’s antitrust watchdog will deepen its scrutiny of Microsoft’s $75 billion takeover of Activision Blizzard. (WSJ)Goldman Sachs has reportedly weighed buying payment-technology companies to expand its credit-card business. (WSJ)The electric carmaker Lucid said it planned to raise up to $1.5 billion in fresh capital. (NYT)PolicyThe private equity giants Apollo, Carlyle and KKR disclosed inquiries by regulators over their dealmakers’ use of messaging apps like WhatsApp for business. (Bloomberg)Supreme Court justices are weighing a Pennsylvania law that requires companies to consent to being sued in its courts for conduct done anywhere. (NYT)Kenya published some details of a 2014 loan it took out from China, potentially straining relations with the country’s biggest source of infrastructure financing. (NYT)Best of the restVirginia Giuffre, a victim of Jeffrey Epstein, now says she may have misidentified the Harvard law professor Alan Dershowitz as an abuser. (NYT)Twitter may now offer two kinds of check marks to verify users. (The Verge)Levi’s named Michelle Gass, Kohl’s chief executive, as its next C.E.O. (NYT)Would you take a Zoom meeting in a movie theater? AMC hopes so. (Insider)UBS’s chief risk officer, Christian Bluhm, is quitting to become … a professional photographer. (FT)Thanks for reading! We’ll see you tomorrow.We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com. More