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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
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Why Wall Street Loves Gridlock in Washington
Stocks tend to rally after midterm elections, historical data shows. They perform even better when voters deliver divided government.“Midterm elections are one of the best historic buy signals.”Brendan Mcdermid/ReutersDivided we rise? It’s become a favorite data point among sell-side Wall Street historians: In the year after every midterm election since 1950, the S&P 500 has gone up, regardless of the party in power.“It’s no exaggeration to say that midterm elections are one of the best historic buy signals for equities we have,” Jim Reid, a markets strategist at Deutsche Bank, wrote in a client note this morning.Even better: Stocks tend to outperform when there’s a divided government. According to LPL Financial, since 1950, the S&P 500 has outperformed (on a 52-week basis) whenever voters produce the power scenario of a split or Republican-controlled Congress and a Democratic president. (The benchmark S&P has climbed 17.5 percent in those years versus an overall average annual return of 12.3 percent.) That combination is looking more likely this morning, with the polls suggesting that the Republicans will most likely take control of the House, while the Senate is a tossup.As always, past performance is no indicator for future gains (or losses). Still, it’s worth examining how politics and investor psychology have tended to influence the markets after midterm elections over the past eight decades.There are two central reasons markets rally after the midterms. First, say the LPL markets strategists Barry Gilbert and Jeffrey Buchbinder, “uncertainty associated with the election is behind us, and markets don’t like uncertainty.” More crucially, investors view the midterms as “something of a course correction from presidential elections.” If the opposing party gains ground, it’s more likely businesses and investors will see greater “prospects of a better policy balance ahead, regardless of who is in the Oval Office.”One result: ambitious tax and government spending increases would be off the table, a scenario that could buoy corporate profits, according to Brian Gardner, the chief Washington policy strategist at Stifel, an investment bank and wealth management firm. A potential drawback? It could open the door to a debt-ceiling standoff, higher odds of a government shutdown and partisan paralysis when it comes to trying to get stuff done — i.e., a fiscal spending plan to lift the country out of a looming recession.The way-too-early winners and losers view: The energy and defense sectors would do well, Gardner says. Big Pharma could also benefit, if Republicans succeed in rolling back Medicare’s ability to negotiate on prescription drug prices, a key pillar of the Inflation Reduction Act. A potential loser is Big Tech, which has critics in both parties.HERE’S WHAT’S HAPPENING Donald Trump drops a hint about 2024. The former president stole the spotlight at a rally in Ohio, telling supporters in a speech for J.D. Vance, the Republican Senate candidate, that he would make “a very big announcement on Nov. 15 at Mar-a-Lago.” The comments fueled speculation that he was gearing up for another White House run.FTT, the digital coin tied to the leading crypto exchange FTX, plunges. The token has lost nearly a quarter of its value in the past day. It is also raising fears about more instability in crypto land, causing drops in Bitcoin, Ether and Solana. Alameda Research, the hedge fund operated by the crypto mogul Sam Bankman-Fried, has big holdings in FTT and Solana.The State of the 2022 Midterm ElectionsElection Day is Tuesday, Nov. 8.Final Landscape: As candidates make their closing arguments, Democrats are bracing for potential losses even in traditionally blue corners of the country as Republicans predict a red wave.The Battle for Congress: With so many races on edge, a range of outcomes is still possible. Nate Cohn, The Times’s chief political analyst, breaks down four possible scenarios.Voting Worries: Even as voting goes smoothly, fear and suspicion hang over the process, exposing the toll former President Donald J. Trump’s falsehoods have taken on American democracy.Nvidia starts selling a China-only chip. The U.S. chip-maker is reportedly selling an alternative to a high-end chip banned from sale in China under new American export restrictions. Meanwhile, Apple’s warning that it would not be able to produce enough iPhones for the holiday season because of Covid-19 lockdowns in China highlights how enmeshed the tech giant is there, even as many of its Western peers are shut out.The owners of Liverpool F.C. put the soccer club up for sale. Goldman Sachs and Morgan Stanley have been hired to sell the franchise, one of the most popular worldwide. The club could sell for far more than the $3 billion that Chelsea fetched this year; Forbes values Liverpool at nearly $4.5 billion.Elizabeth Holmes is denied a new trial. A federal judge that the Theranos founder’s arguments for a new one didn’t introduce any new evidence. Holmes is set to be sentenced on Nov. 18 on four counts of criminal fraud.Activists at COP27 in Egypt.Sean Gallup/Getty ImagesMoney matters dominate COP One of the big questions to emerge so far from COP27: Who is paying for efforts to combat global warming, and is it fair? Here’s what’s happening at the gathering in Sharm el Sheikh, Egypt:The Switzerland plan — pay poorer countries to reduce their carbon emissions, then claim credits toward its own carbon footprint — is drawing scrutiny.Egypt may be hosting a conference dedicated to reducing carbon emissions, but it’s eager to sell fossil fuels to Europe to raise money for its debt-ridden economy.Climate activists are protesting Coke’s sponsorship of COP27, pointing to its increasing use of plastics.A new study by Oxfam said that the world’s 125 wealthiest individuals collectively produce 393 million tons in annual carbon emissions — or 3 million tons each on average.Musk, and the power of one Is Elon Musk’s frenetic management style, which is often punctuated by a daily tweet barrage (including a now-deleted one engaging with a quote from a white nationalist), a sign of genius, or an indication that he’s in over his head? Yesterday, the prominent venture capitalist Chris Sacca, an early Twitter investor, spoke on the matter.“One of the biggest risks of wealth/power is no longer having anyone around you who can push back, give candid feedback, suggest alternatives, or just simply let you know you’re wrong,” he wrote.Musk’s management of Twitter has been chaotic. He pushed for a huge round of layoffs, only to ask some of those workers to return. He delayed the rollout of Twitter’s subscription product amid internal pushback. Advertisers have paused their spending. While Musk says Twitter usage is at a record high, others point to potentially troubling data. And just yesterday, he publicly urged independent voters to back Republican candidates in today’s midterm elections.Others are seizing on the moment: The news publisher Axios has promoted its newsletters to potential advertisers as a “well-lit alternative to Twitter,” according to an email to ad buyers obtained by DealBook.Many of his supporters remain in his corner. The investor Ron Baron, an early Tesla investor, told CNBC that the opportunities at Twitter were “gigantic.” Meanwhile, Musk allies in charge at Twitter include his personal lawyer and a crowd nicknamed “Elon’s goons.” Sacca was unimpressed: “I’ve recently watched those around him become increasingly sycophantic and opportunistic.”Sacca sees a corollary in Travis Kalanick, Uber’s co-founder. In 2017, Kalanick resigned from the ride-hailing company after shareholders revolted over a toxic workplace culture. Other tech founders have been similarly humbled: Musk was fired from PayPal in 2000.To be clear, Sacca isn’t calling for Musk to leave Twitter. “I really want this thing to work,” he tweeted. “The only way I see that happening is if anyone around Elon can speak some truth to power and complement his bold and ambitious instincts with desperately needed nuance.”In fashion, green clashes with antitrustFashion brands are under pressure to go green. But an effort by some big houses to collaborate on sustainability initiatives has put them in the cross hairs of antitrust authorities, with European regulators claiming that some attempts may have resembled collusion, write The Times’s Lizzie Paton and Jenny Gross, and DealBook’s Ephrat Livni.The coronavirus pandemic inspired fashion to rethink its practices. During lockdowns, a group of clothing executives and designers spoke on Zoom about limiting waste, and went on to publish ambitious statements in 2020 on making the industry more environmentally friendly. But those declarations set off alarm bells in Brussels: E.U. antitrust regulators raided unnamed fashion houses in May, stating that the targets may have violated rules against price fixing and created a cartel. (People at several of the companies confirmed they had been contacted. The brands declined to comment, and the E.U. has not publicly identified them.)Many sustainability policies would end up raising prices and reducing quantity, said Hill Wellford, a former antitrust official at the Justice Department now at the law firm Vinson & Elkins. “Multiple client consortiums have called me about making agreements for environmental purposes,” he said, “and I have to say to them, ‘Those are dangerous to do.’”The clash between sustainability and competition policy is hot political fodder. “Congress will increasingly use its oversight powers to scrutinize the institutionalized antitrust violations being committed in the name of E.S.G.,” Senator Tom Cotton, Republican of Arkansas, and others wrote in a Nov. 3 letter to 51 major law firms advising clients on environmental practices. With Republicans likely to win back at least one chamber in the midterm elections, conservative lawmakers are gearing up for more of these kinds of fights.“Inside counsel at major companies who really want to be sustainability leaders see antitrust as their biggest hurdle,” Amelia Miazad, an expert in sustainable capitalism and the founder of the Business in Society Institute at Berkeley Law, told The Times. “Companies cannot continue to produce products for consumers in the future unless they’re able to collaborate.”THE SPEED READ DealsThe actor Matthew McConaughey reportedly may join a potential bid by Jeff Bezos and Jay-Z for the N.F.L.’s Washington Commanders. (N.Y. Post)Investment losses at Tiger Global’s flagship hedge fund have grown to nearly 55 percent as the firm’s bets on tech companies and on China suffered. (FT)Foxconn will invest $170 million in the electric truck maker Lordstown Motors. (WSJ)SoftBank’s C.E.O., Masayoshi Son, reportedly plans to put an end to his memorably unusual earnings presentations. (WSJ)PolicyThe Justice Department seized Bitcoin once valued at nearly $3.4 billion from a man who pleaded guilty to stealing from the Silk Road online black-market bazaar. (WSJ)Oil companies have called Britain “fiscally unstable” as its government weighs a windfall tax on the industry. (FT)The Supreme Court’s conservative justices signaled that they were open to further limiting the power of federal regulators like the S.E.C. (NYT)Best of the restJohn Tyson, the C.F.O. of the meat processor Tyson Foods, was arrested after he reportedly became intoxicated and fell asleep in the wrong house. (CNBC)British companies have an “appalling” shortfall of women in executive positions, according to new research. (FT)Inside the messy split — Rolexes and handbags held as hostages and more — of Rome’s soccer legend and his estranged wife. (NYT)John Foley, Peloton’s co-founder and former C.E.O., has found his next act: selling custom rugs directly to consumers. (Insider)Evelyn de Rothschild, who helped unite branches of his family’s banking dynasty and advised the British government and Queen Elizabeth II, has died. He was 91. (Bloomberg)Thanks for reading! We’ll see you tomorrow.We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com. More
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Resistance to Misinformation Is Weakening on Twitter, a Report Found
Concerns about misinformation on Twitter have flared in the days since Elon Musk’s takeover on Oct. 27, pushing away advertisers, rattling researchers and increasing fears that conspiracy theories and false narratives could pollute the political discourse on the platform ahead of the midterm elections.Researchers at the Fletcher School at Tufts University said in a report that “early signs show the platform is heading in the wrong direction under his leadership — at a particularly inconvenient time for American democracy.”The researchers said they had tracked narratives about civil war, election fraud, citizen policing of voting, and allegations of pedophilia and grooming on Twitter from July through October. They said they had found that the discussion reflected a commitment to combating misinformation, hate speech and toxic ideas.“Post-Musk takeover, the quality of the conversation has decayed,” as more extremists and misinformation peddlers tested the platform’s boundaries, the researchers wrote.Before Mr. Musk took control of Twitter, posts pushing back against misinformation, hate and other toxic speech were usually many times greater than the original false or misleading posts, the Tufts researchers discovered.Conspiracy theories focused on unfounded allegations of pedophilia or “grooming,” which advance an anti-L.G.B.T.Q. message, have encountered less resistance from a Musk-led Twitter, the Tufts report found. Earlier spikes in the topic were accompanied by strong condemnation; after Oct. 28, researchers wrote, “the conversation deteriorated quickly” as users tested Twitter moderators by repeatedly writing “GROOMER,” in an echo of a coordinated campaign to spread antisemitic content as the platform adjusted to Mr. Musk.On Monday, with hours to go before the vote, Mr. Musk tweeted out a link to Twitter’s rules, which he said “will evolve over time.” Watchdog groups quickly noticed that the page did not explicitly address misinformation, although it did prohibit users from using the platform to manipulate or interfere in elections, employ misleading and deceptive identities or share harmful synthetic or manipulated media. A separate page about misinformation in Twitter’s “Help Center” section remained live.Fears about ads appearing in proximity to misinformation and other problematic posts have led General Mills, United Airlines and several other large companies to pause their spending on Twitter in recent days. Content moderation has sparked heated exchanges on Madison Avenue with and about Mr. Musk. More
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Elon Musk Is Tweeting Through a Tide of Criticism
The new owner of Twitter has embarked on a tweeting spree to push back, spar and justify his actions.Illustration By The New York Times; Photo By Adrees Latif/reutersUnder pressure and facing a wave of criticism, Elon Musk has increasingly turned to his favorite release valve: Twitter.Since Saturday, Mr. Musk, the world’s richest man and the new owner of Twitter, has embarked on a tweeting spree so voluminous that he is on a pace to post more than 750 times this month, or more than 25 times a day, according to an analysis from the digital investigations company Memetica. That would be up from about 13 times a day in April, when Mr. Musk first agreed to buy Twitter.His recent tweets have covered an increasingly broad range of topics. Over the last four days, Mr. Musk, 51, needled the comedian Kathy Griffin and beefed with the Twitter co-founder Jack Dorsey on the platform. He made masturbation jokes aimed at a rival — and much smaller — social media platform. He posted, then deleted, a tweet engaging with a quote from a white nationalist. And he defended his ownership of Twitter, including why he had laid off 50 percent of the company’s staff and why people should not impersonate others on the service.All in all, Mr. Musk, who described himself in his Twitter profile as “Chief Twit” before later changing the description to “Twitter Complaint Hotline Operator,” has tweeted more than 105 times since Friday, mainly about Twitter, according to a tally by Memetica.“Birds haven’t been real since 1986,” Mr. Musk tweeted on Sunday in a discussion thread about Twitter, including a meme from an absurdist conspiracy theory that posits that birds are actually robot spies. He did not respond to a request for comment.Mr. Musk is under tremendous scrutiny 11 days after completing his $44 billion deal for Twitter, which was the largest leveraged buyout of a technology company in history. On Friday, he cut roughly 3,700 of the company’s 7,500 employees, saying he had no choice because Twitter was losing $4 million a day. At the same time, he has found himself embroiled in the same content debates that have plagued other social media companies, including how to give people a way to speak out without spreading misinformation and toxic speech.More on Elon Musk’s Twitter TakeoverA Familiar Playbook: In his first days at Twitter, Elon Musk has been emulating some of the actions of Mark Zuckerberg, who leads Facebook, Instagram and WhatsApp.A Different Kind of Deal: Silicon Valley moguls used to buy yachts and islands. Now they are rich enough to acquire companies they fancy.‘Hard Fork’: In an episode of The Times’s tech podcast, two Twitter employees described the atmosphere inside the company in the aftermath of the acquisition.Effect on Midterms: Mr. Musk is in the middle of firing thousands of Twitter employees, including many who helped fight misinformation. What could that mean for the upcoming elections?Already Mr. Musk has had to delay the rollout of a subscription product that would have given people check marks on their Twitter profiles. Advertisers have paused their spending on Twitter over fears that Mr. Musk will loosen content rules on the platform. And the midterm elections are set to be a test of how a slimmed-down Twitter will perform in catching inflammatory posts and misinformation about voting and election results.In a report that was published on Monday, researchers at the Fletcher School at Tufts University said the early signs of Mr. Musk’s Twitter “show the platform is heading in the wrong direction under his leadership — at a particularly inconvenient time for American democracy.”The researchers said they had tracked narratives about civil war, election fraud, citizen policing of voting, and allegations of pedophilia and grooming on Twitter from July through October. “Post-Musk takeover, the quality of the conversation has decayed” as more extremists and misinformation peddlers have tested the platform’s boundaries, the researchers wrote.Amid the hubbub, Mr. Musk’s behavior on Twitter suggests that he intends to simply post through it. And while he has always been a prolific tweeter, he has raised the level in recent days.On Friday, Mr. Musk, who has more than 114 million followers on Twitter, proposed a “thermonuclear name & shame” campaign against brands that had stopped advertising on the platform. He said that he had done everything he could to appease advertisers but that activists had worked against him to cause brands to drop out of spending on Twitter.At the same time, the billionaire was embroiled in a fight over his plan to charge Twitter users $8 a month for a subscription service, Twitter Blue, which would give a check mark to anyone who paid. The check mark had been free for notable people whose identities had been verified by the company, including celebrities, politicians and journalists, as a way to protect against impersonation.Critics were unhappy about Mr. Musk’s plans to monetize the check mark, saying it could lead to the spread of misinformation and fraud on the platform. In protest, some Twitter accounts that had check marks changed their display names and photographs to match Mr. Musk’s account over the weekend, a move intended to illustrate why it would be confusing if anyone could buy a check mark.On Sunday, Mr. Musk announced that he would permanently suspend any account “engaging in impersonation without clearly specifying ‘parody.’” The billionaire, who had previously criticized Twitter when it permanently barred users, then barred Ms. Griffin, who had posed as him on the service.Mr. Musk, who has called himself a “free speech absolutist,” is learning the basic expectation of content moderation for popular social networks, said Daphne Keller, director of the Program on Platform Regulation at Stanford’s Cyber Policy Center.“His ideas have been incoherent for a while,” she said.On Sunday night, Mr. Musk responded to a tweet featuring a quote from a white nationalist, before deleting the post and moving on to squabble with Mr. Dorsey over Birdwatch, a feature that lets community members add context to tweets that they believe are misleading. Mr. Musk, who previously lauded the feature, proposed changing the feature’s name to “Community Notes.”“Community notes is the most boring Facebook name ever,” replied Mr. Dorsey, who owns a $1 billion stake in Mr. Musk’s Twitter.Then on Monday, Mr. Musk suggested he might pursue civil society groups and activists who were pushing for Twitter advertiser boycotts, when he replied to a right-wing commentator that “we do” have grounds for legal action. Legal experts said the holding of boycotts for social and political goals is protected under the First Amendment.Mr. Musk also tweeted that people should vote Republican in Tuesday’s midterm elections. “Shared power curbs the worst excesses of both parties, therefore I recommend voting for a Republican Congress, given that the Presidency is Democratic,” he tweeted. He later posted that he was an independent with a “voting history of entirely Democrat until this year.”He soon moved on. Mr. Musk’s attention became fixed on Mastodon, a Twitter competitor that has gained traction over the past 10 days. Playing off Mastodon’s name, he made several crude jokes about masturbation — then deleted those posts an hour later.Tiffany Hsu More
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Twitter Said to Delay Changes to Check Mark Badges Until After Midterms
Users and employees had raised concerns that Elon Musk’s plan to give check marks to those who paid a monthly fee could be misused to sow discord.Twitter is delaying the rollout of verification check marks to subscribers of its new $7.99 a month subscription service until after Tuesday’s midterm elections, according to an internal post viewed by The New York Times and two people with knowledge of the decision.The company made the call a day after announcing that it was rolling out the program for people to receive a verification check mark on their profile for the monthly fee. On Saturday, the company had said in notes accompanying a new update to the Twitter app that the paid verification system was now a feature of the website’s subscription service, Twitter Blue.“Power to the people,” the announcement said. “Your account will get a blue check mark, just like the celebrities, companies, and politicians you already follow.”But many Twitter users and employees raised concerns that the new pay-for-play badges could cause confusion ahead of Tuesday’s elections because users could easily create verified accounts — say, posing as President Biden or as lawmakers or news outlets and publishing false information about voting results — which could potentially sow discord. In an internal Slack channel on Saturday, one Twitter employee asked why the social network was “making such a risky change before elections, which has the potential of causing election interference.”A manager working on the verification badge project responded on Sunday that “we’ve made the decision to move the launch of this release to Nov. 9, after the election.”Twitter, whose communications team has been almost entirely laid off, did not immediately respond to a request for comment. Nov. 9 is the day immediately following Tuesday’s election, and many races may still be undecided as votes are tallied.Charging for the verification check mark program had been one of the changes made by Elon Musk, who took over Twitter late last month in a $44 billion buyout. The billionaire is under financial pressure from the deal, which he partly financed with $13 billion in debt. Twitter has long been unprofitable and, like other social media companies, it faces a weakening in digital advertising spending as the global economy tips toward a recession.On Friday, Mr. Musk laid off roughly half of Twitter’s employees, or about 3,700 jobs. He said at the time that he had no choice but to make the cuts because the company was losing $4 million a day.Mr. Musk and his advisers have also been discussing various ways to wring more money out of Twitter. In addition to the check mark program, they have talked about adding paid direct messages — which would let users send private messages to high-profile users — to the service, as well as “paywalled” videos, which would mean that certain videos could not be viewed unless users paid a fee. They have also discussed reviving Vine, a onetime short-form video platform.On Sunday, Mr. Musk said Twitter would continue to crack down on accounts that pretend to be other people. “Going forward, any Twitter handles engaging in impersonation without clearly specifying ‘parody’ will be permanently suspended,” Mr. Musk said in a tweet. More
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What Twitter’s Shake-Up Could Mean: Midterm Misinformation Run Amok
Declining trust in institutions is fostering mistrust about voting, leading many Americans to embrace conspiracy theories about elections.A recent exchange between David Becker, a nonpartisan elections expert, and a Twitter user named “@catturd2” — an account with nearly a million followers that sometimes exchanges posts with Elon Musk, the world’s richest man and the new owner of Twitter — offered a telling example of why misinformation is such an intractable problem.“Funny how we could easily count every vote in every state on election night until a few years ago,” the account tweeted. The false claim racked up 67,000 likes.“With all due respect to catturd,” Becker clarified to his much smaller list of 15,000 followers, “we have never, in the history of our nation, come close to counting all the votes on election night. Every state takes weeks to count all the ballots (incl military) and officially certify the results. Every state. Always.”Why does this matter? Because false information about the mechanics of voting fosters mistrust and is leading many Americans — overwhelmingly on the right — to embrace conspiracy theories about elections.And by the way, Musk is in the middle of firing thousands of Twitter employees, including members of the trust and safety teams that manage content moderation.“It’s an egregiously irresponsible thing to do just days before midterms that are likely to be mired by voter intimidation, false claims of election rigging and potential political violence,” said Jesse Lehrich, a co-founder of the nonprofit watchdog group Accountable Tech.First: Lest there be any doubt, the notion that America ever counts every vote on election night is both flatly untrue and easily checkable. California, for instance, has never come anywhere within shouting distance of that goal. Close races there can take weeks to call. New York State is notoriously slow at counting votes; in 2020, local election boards did not start counting absentee ballots until seven days after Election Day. Some waited even longer.There’s no conspiracy here. It takes a long time to count votes in a country as big as the United States. This is why states have processes in place to certify the results over the course of weeks. Alaska, for instance, isn’t planning to tabulate and release unofficial results of its election until Nov. 23. That’s entirely normal.But with Twitter in turmoil, Lehrich is worried about how misinformation about voting might spread unchecked over the next few days and weeks. “Things are going to fall through the cracks, even if Elon doesn’t do anything intentional to sabotage stuff,” he said.Tweeting alonePart of what’s going on here is declining levels of trust in the pillars of American civic life — a decades-long trend captured vividly in “Bowling Alone,” Robert Putnam’s famous book from 2000.The numbers are even worse now. Jeffrey Jones, an analyst at Gallup, noted in July that Americans had reached “record-low confidence across all institutions.”News organizations polled near the bottom of Gallup’s list. Just 16 percent of the public said they had “a great deal” or “quite a lot” of confidence in newspapers, and only 11 percent said the same for TV news.The differences by party were stark. Just 5 percent of Republicans and 12 percent of independents said they had high confidence in newspapers, and only 35 percent of Democrats said the same. All of these numbers had declined from a year earlier.Coming in the middle of a midterm election in which journalists are trying to inform millions of voters about what’s happening and to help them assess the ideas and personal characteristics of the candidates, Gallup’s finding was alarming.And that’s just one data point. A recent poll by Bright Line Watch, a project run by a group of political scientists, found that 91 percent of Democrats were confident that their vote would be counted, versus just 68 percent of Republicans. That lack of trust is the starter fuel of election denialism.Organized groups on the right have been going after the press for decades, and conservative politicians often take up the chorus. Richard Nixon’s ill-fated vice president, Spiro Agnew, called journalists “nattering nabobs of negativism”; Donald Trump attacked the news media as the “fake news” and the “enemy of the people”; Gov. Ron DeSantis of Florida ripped the “corporate media” despite being a frequent guest on Fox News — which, yes, is a corporation. If Walter Cronkite walked among us today, he’d be pilloried as a liberal shill.The left has its own beef with the news media. This week, Dan Froomkin, a reliably acerbic liberal critic of political coverage, wrote a post asking, “Why aren’t mainstream journalists sounding the alarm about the threat to democracy?” He lamented how, in his view, political reporters were “just covering it like another partisan fight.”Political reporters do cover partisan fights; there’s an election going on, and readers care about who is winning, who is losing and why.But mainstream news outlets also invested heavily this year in coverage of the Jan. 6 hearings, election denialism, political violence, dangers to election workers, plots to disrupt the midterms, misinformation and threats to democracy more generally. There’s been a lot of tough, critical coverage of election denialism.Local news is often another story. Here’s a tweet from KTNV, a television station in Nevada: “Democrat Cisco Aguilar and Republican Jim Marchant are running to be the next Secretary of State in Nevada. And both have the same focus: election integrity.”The text of the article implies that Marchant, the leader of a far-right slate of candidates for top election posts in several states who deny the legitimacy of Joe Biden’s 2020 victory, is spreading “unfounded claims of widespread election fraud.” But it doesn’t say so explicitly.In an interview, Aguilar pointed to the KTNV article as an example of how news coverage had treated the candidates too evenhandedly and was giving Marchant a platform he didn’t deserve. (Marchant did not respond to an email sent to three of his known addresses.)When I asked Adrian Fontes, the Democratic candidate for secretary of state in Arizona, how he planned to combat misinformation if he wins his race against Mark Finchem, a far-right Republican who has stoked conspiracy theories about elections, he made a similar argument.“Actually, it’s not a hard problem,” Fontes said, urging journalists to stop “chasing shiny objects” and “crazy conspiracy theories” and focus instead on what election workers do.“As secretary of state,” he said, “I plan on celebrating them, elevating them and making sure that guys like you, respectfully, don’t ignore them in favor of the weirdos.”Facts are stubborn things, except when they’re not.Increasingly, though, millions of Americans aren’t getting their information from people like me. They’re following sources that have none of the checks and balances — however imperfect — that most mainstream outlets have in place.Over the last few decades, as it has stoked mistrust in the mainstream media, the right has built up a closed-off alternate ecosystem that includes Fox News, but also fringier outlets like Newsmax or One America News Network. But even those places put their names behind their stories, and viewers have a good sense of the perspective and slant they represent.This morning, I asked @catturd2 on Twitter if the user behind the account planned to issue a correction or delete the incorrect information. No response yet, but the account wrote in another tweet: “LOL – Look what Twitter did to my tweet – trying to fact check it with the fake news commie NYT,” followed by five laugh-cry smiley face emojis.Surveys show that younger people increasingly trust what they see on social media about as much as they trust traditional news sources. Data also shows that readers often can’t tell the difference between news reporting and opinion, even when they are labeled explicitly. Social media timelines jumble them all up together.And, as the Pew Research Center has noted, people don’t even agree on what a “fact” is: “Members of each political party were more likely to label both factual and opinion statements as factual when they appealed more to their political side,” Pew wrote in 2018.Those people staking out drop boxes in Arizona to intimidate voters based on false information, or demanding the hand-counting of ballots in Nevada? They aren’t getting their information from mainstream sources.How do honest and fair reporters reach them with accurate news? That’s a much deeper societal challenge, and nobody seems to have any good answers.What to read tonightDonald Trump is expected to announce a third White House campaign soon after the midterms, possibly as soon as Nov. 14, Michael Bender and Maggie Haberman write.In Wisconsin, one the nation’s most evenly divided swing states, Republicans are close to capturing supermajorities in the State Legislature that would render the Democratic governor irrelevant, even if he wins re-election, Reid Epstein reports.San Luis, Ariz., a small farming outpost on the border, played a critical role in the making of “2,000 Mules,” a conspiratorial movie about supposed election fraud in 2020. Now some residents are scared to vote, Jack Healy and Alexandra Berzon write.Sheera Frenkel looks at the phenomenon of “participatory misinformation” on the internet, where hunting for voter fraud has became a game.viewfinderDon Bolduc arriving on Wednesday at Saint Anselm College in Goffstown, N.H., for his debate against Senator Maggie Hassan.John Tully for The New York TimesFist-pumping in a classic political battlegroundAt 5:30 p.m., there was an all-out sprint from campaign workers, volunteers and supporters.The goal: to find the best view of a parking lot where Senator Maggie Hassan and her Republican challenger, Don Bolduc, would arrive for their final debate. Each candidate’s supporters fought for position so their signs would be visible.Inside the New Hampshire Institute of Politics at Saint Anselm College in Goffstown, the stage was being set for Hassan, a Democrat, and Bolduc, whose Senate race has tightened in recent weeks, giving Republicans hope for an upset victory.Hassan was the first to arrive, working the line for about a minute before heading inside. Within 30 seconds or so, Bolduc arrived, to cheers and jeers.He pumped his fists in front of supporters, and I captured this image — a look at grass-roots political theater in New Hampshire.Thank you for reading On Politics, and for being a subscriber to The New York Times. — BlakeRead past editions of the newsletter here.If you’re enjoying what you’re reading, please consider recommending it to others. They can sign up here. Browse all of our subscriber-only newsletters here.Have feedback? Ideas for coverage? We’d love to hear from you. Email us at onpolitics@nytimes.com. More
- in Elections
Elon Musk Takes a Page Out of Mark Zuckerberg’s Social Media Playbook
As Mr. Musk takes over Twitter, he is emulating some of the actions of Mr. Zuckerberg, who leads Facebook, Instagram and WhatsApp.Elon Musk has positioned himself as an unconventional businessman. When he agreed to buy Twitter this year, he declared he would make the social media service a place for unfettered free speech, reversing many of its rules and allowing banned users like former President Donald J. Trump to return.But since closing his $44 billion buyout of Twitter last week, Mr. Musk has followed a surprisingly conventional social media playbook.The world’s richest man met with more than six civil rights groups — including the N.A.A.C.P. and the Anti-Defamation League — on Tuesday to assure them that he will not make changes to Twitter’s content rules before the results of next week’s midterm elections are certified. He also met with advertising executives to discuss their concerns about their brands appearing alongside toxic online content. Last week, Mr. Musk said he would form a council to advise Twitter on what kinds of content to remove from the platform and would not immediately reinstate banned accounts.If these decisions and outreach seem familiar, that’s because they are. Other leaders of social media companies have taken similar steps. After Facebook was criticized for being misused in the 2016 presidential election, Mark Zuckerberg, the social network’s chief executive, also met with civil rights groups to calm them and worked to mollify irate advertisers. He later said he would establish an independent board to advise his company on content decisions.Mr. Musk is in his early days of owning Twitter and is expected to make big changes to the service and business, including laying off some of the company’s 7,500 employees. But for now, he is engaging with many of the same constituents that Mr. Zuckerberg has had to over many years, social media experts and heads of civil society groups said.Mr. Musk “has discovered what Mark Zuckerberg discovered several years ago: Being the face of controversial big calls isn’t fun,” said Evelyn Douek, an assistant professor at Stanford Law School. Social media companies “all face the same pressures of users, advertisers and governments, and there’s always this convergence around this common set of norms and processes that you’re forced toward.”Mr. Musk did not immediately respond to a request for comment, and a Twitter spokeswoman declined to comment. Meta, which owns Facebook and Instagram, declined to comment.Elon Musk’s Acquisition of TwitterCard 1 of 8A blockbuster deal. More
