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Class-action suit filed against Binance for alleged harm to FTX before its collapse

A California resident is suing Binance and its CEO for tweets last November that, according to allegations, led to the collapse of the rival exchange….

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A California resident is suing Binance and its CEO for tweets last November that, according to allegations, led to the collapse of the rival exchange.

A class-action suit was filed against Binance.US and Binance CEO Changpeng Zhao on Oct. 2 in the District Court of Northern California alleging various violations of federal and California law on unfair competition for attempting to monopolize the cryptocurrency market by harming its competitor FTX. The suit was brought by Nir Lahav, who is identified only as a California resident. 

At issue are posts made by Zhao on Twitter (now X) in early November on the eve of FTX’s collapse. The posts were made in conjunction with the decision by the defendants to liquidate their holdings in the FTX utility token FTT on Nov. 6. The plaintiffs estimated that Binance owned up to 5% of all FTT tokens.

Suit filed against Binance and Changpeng Zhao. Source: CourtListener

The following day, Zhao stated in a Twitter post that Binance had signed a letter of intent to acquire FTX, but it backed out of that deal one day later. According to the suit:

“Zhao publicly disseminated this information [on the withdrawal of the acquisition offer] on twitter and other social media platforms to hurt FTX Entities that ultimately lead to a rushed and unprecedented collapse of FTX Entities.”

After began its argumentation with a defense of the Securities and Exchange Commission’s (SEC) policies on crypto and invocation of the Supreme Court’s Howey and Reves decisions, among others.

It went on to claim that Zhao’s Nov. 6 tweet, “Due to recent revelations that have came [sic] to light, we have decided to liquidate any remaining FTT on our books,” was false and misleading, since Binance has already sold its FTT holdings, and the post was “intended to cause the price of FTT in the market to decline.”

Related: New FTX documentary to spotlight SBF-CZ relationship

The plaintiffs found evidence for their claim in the same post by Zhao, where he wrote, “We are not against anyone. […] But we won’t support people who lobby against other industry players behind their backs.” The plaintiffs took the latter sentence to indicate that Binance opposed FTX CEO Sam Bankman-Fried’s “regulatory efforts.”

The suit alleges that Zhao’s proposal to acquire FTX was not made in good faith and the episode would “ultimately lead” to the collapse of FTX:

“Zhao’s tweet resulted in FTT price declining from US 23.1510 to US 3.1468. This significant drop plummeted FTX Entities into bankruptcy without giving an opportunity or chance to FTX Entities’ executives and board of directors a chance [sic] to salvage the situation and put in safe guards to protect its clients and end-users.”

The suit demanded monetary damages, court costs and disgorgement of ill-gotten gains based on seven counts. “Plaintiff believes that there are thousands of members of the proposed class,” the suit stated.

As the suit noted, both Binance and FTX are currently subject to SEC actions. The criminal case against Bankman-Fried will begin Oct. 4 in New York. Zhao addressed potential accusations of unfair competition in the same tweet that is cited in the suit. “Regarding any speculation as to whether this is a move against a competitor, it is not,” he wrote.

His statement did not stop speculation to that effect within the crypto community, however. The CEOs of the crypto exchanges traded jibes on then-Twitter for weeks afterward.

Magazine: FTX bankruptcy filing details, Binance’s crypto industry fund and a U.S. CBDC pilot: Hodler’s Digest, Nov. 13-19

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The “bearish steepening” and the death of refinancing

  – by New Deal democratIf you’ve paid much attention to the financial press in recent days, you have probably read stories that the yield curve…

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35 mins ago

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October 16, 2023

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 - by New Deal democrat

If you’ve paid much attention to the financial press in recent days, you have probably read stories that the yield curve - the line that traces the difference in rates in different length bond maturities - has moved towards un-inverting. That is, the situation whereby short term rates are higher than long term rates is moving in the direction of reversing towards a more usual pattern of longer term rates being higher.


But you’ve probably also heard this referred to as a “bearish steepening.” That means that the un-inversion of the yield curve isn’t happening because short term rates are moving lower, but rather because long term rates have been headed higher.

Is a “bearish steepening” of the yield curve in fact bad? Yes, it is. That’s because it means that the interest rates that consumers and businesses have to pay on loans are also headed higher. Those loans become more expensive, and economic activity slows down.

So let’s go to the graphs. 

First, here is a graph for the past 2 years of the Fed funds rate (red) compared with 10 year Treasury rates (blue):



When the red line moved above the blue line, that was an inversion. The inversion still exists, but the two lines reached their maximum difference in early May. Since then, and especially in the past month, the two lines have moved closer, mainly because Treasury rates have headed higher. That’s the “bearish steepening.”

Has this happened before? Here’s a look at the same data over last 40 years:



Note that several times in the 1980s and 1990s (particularly 1984 and 1994) both the Fed funds rate and Treasury rates moved higher. There was also one instance where an inversion resolved to higher rates (1998).

Let’s take a close look at these. Below I again show 10 year Treasury rates (red, right scale) compared with the yield curve measured by the difference between 10 year and 3 month Treasury maturities (blue, left scale):



We can see at least 5 instances in the 1980s and 1990s when the yield curve became more positive (i.e., longer rates relatively higher than shorter rates) at the same time as long rates themselves moved higher: 1984, 1986, 1994, 1996, and 1998. As mentioned above, only in the last case had the yield curve inverted.

The good news is, in no case following these “bearish steepenings” did a recession happen in the next 12 months. But the bad news, in all but one of these cases for our purposes, is why. 

Focus on the red line (Treasury interest rates). In 3 of the 5 cases - 1984, 1994, and 1996 - long term interest rates moved back down within 12 months to rates close to or even below the level they had been before the steepening began. This allowed consumers either to refinance mortgage debt at lower rates, or to buy new houses or vehicles at lower rates of financing.

To wit, here’s what happened with housing permits in the 1980s and 1990s (gold, right scale) compared with both long term rates and Fed funds rates:



In 1985, 1995, and 1997, housing permits increased significantly as buyers were able to lock in lower interest rate mortgages.

Although the data is noisier, the same thing happened with light vehicle sales:



Note there is a longer delay before vehicle sales moved higher or lower. This is because of a delay in the changes in motor vehicle financing rates:



But what about the other two times? In both 1986 and 1998, the economy was bailed out by 25% declines in gas prices (not shown). Even so, because interest rates did not decline to new lows in 1999, housing permits (see above) continued to decline, helping set the stage for the ultimate 2001 recession.

So what about now?  Remember that housing permits follow interest rates with a 3-6 month lag. Permits recently improved, following the decline in interest rates earlier this year. That is very likely to reverse lower in the months ahead (possibly beginning with tomorrow’s report for September):



And motor vehicle sales are giving equivocal signals, suggesting that they may be peaking:



Finally, turning to refinancing itself, here is a long term graph from Edward Yardeni of the Mortgage Bankers Association’s Refinancing Index:



Although the graph does not show the 1980s, note that refinancing all but stopped in 1994, but resumed with a sharp increase in 1995, and again in 1996-97. But it declined sharply and stayed down for a year or more in 1999-2000. The inability of consumers to refinance at lower mortgage rates, thus freeing up money for other spending, was a significant precursor to the 2001 recession.

As shown in the second graph from the top above, long term rates failed to make new lows for at least 3 years before the onset of the 1991, 2001, and 2008 recessions. As a result, as time went on, refinancing declined sharply. There were renewed bouts of refinancing after the Great Recession, and after the pandemic lockdowns, as long term rates hit new lows again. It is quite unlikely that we will see long term interest rates as low as they were in 2020 during our lifetimes, and 3 years have passed since then:



Now interest rates are at 10+ year highs, and as you can see from Yardeni’s graph, refinancing is all but dead. Even when interest rates go down again, because they are *very* unlikely to go as low as they were in 2020, refinancing is unlikely to be anywhere even remotely as common as it was between 2001-2020.

In conclusion, unless the yield curve actually un-inverts, the recession signal from its inversion remains. And the increase in long term interest rates can be expected to put further pressure on both business and consumer borrowing. It is indeed a “bearish steepening.”

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3 Top Penny Stocks to Buy According To Insiders In October

Penny stocks to buy according to insiders.
The post 3 Top Penny Stocks to Buy According To Insiders In October appeared first on Penny Stocks to Buy, Picks,…

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October 16, 2023

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Finding Penny Stocks through Insider Trading Activity

Penny stocks, defined as stocks trading under $5 per share, offer traders huge upside potential but also carry significant risks. One strategy used by some investors to identify promising penny stocks is tracking insider trading activity through SEC filings. Insiders like directors and officers are privy to material nonpublic information that can give them an edge in timing their trades.

Monitoring what insiders are buying and selling can provide clues for picking potential winners before major moves. However, while insider transactions can be informative, this approach has limitations and requires thorough vetting.

This article explores using insider activity to find penny stocks, along with the risks, rewards, and best practices for making sound investments. We also take a closer look at a handful of penny stocks to watch after recent bouts of insider buying.

How Insiders Legally Trade Stock in Their Own Company

Corporate executives, board members, and large shareholders are considered insiders of public companies. Under securities laws, it is illegal for insiders to trade stock based on material nonpublic or confidential information that could impact share price once it becomes known publicly. However, insiders can legally trade as long as certain protocols are followed.

Common ways insiders execute legal stock transactions in their own company include exercising employee stock options as part of compensation packages. These are scheduled transactions that follow predefined rules about timing and amount of shares traded. Another method is selling shares according to 10b5-1 pre-set trading plans that establish future trades at a specific time. This is meant to avoid accusations of trading on insider knowledge.

Insiders may also make buys or sells based on publicly available information or immaterial events unlikely to move the share price significantly. Finally, they can execute trades based on data provided by an independent source, not obtained through the insider’s role.

Despite following these guidelines, the SEC still scrutinizes insider trades closely for any hint of illegal activity. But when done properly, monitoring legal insider transactions through SEC disclosures can help identify promising penny stocks.

Penny Stocks To Watch

Lexicon Pharmaceuticals (LXRX)

biotech penny stocks to buy

Lexicon specializes in gene targeting, including discovering and developing medicines to treat various diseases. Treatments have a wide range of focus, including heart failure, neuropathic pain, diabetes, and metabolism indications.

Shares of LXRX stock have been on the rise ever since the company announced that Express Scripts determined that it will put INPEFA on its Premier Access and Premier Performance formularies, nationally. This was discovered using Lexicon’s gene science platform. Lonnel Coats, Lexicon’s chief executive officer said, “We have been working towards this achievement and hope to continue this momentum with additional significant progress towards broad access to and coverage for INPEFA.”

– Penny Stocks To Buy Now? 8 To Watch With Unusual Options Action

This week Lexicon is also presenting at an industry conference. The company will be at the Academy of Managed Care Pharmacy Nexus Meeting in Orlando. Lexicon will have findings from two studies on INPEFA on October 17. Ahead of this event, insiders have also started getting more active. Director Raymond Debbane picked up a total of 1 million shares of LXRX stock at prices ranging from $1.02 to $1.19.

Intrusion Inc. (INTZ)

Another one of the names on this list of penny stocks with insider trading is Intrusion. The company specializes in cyber-attack prevention solutions and recently announced a multi-million dollar award, which has helped give a boost to momentum in the penny stock.

Last week Intrusion won a $5 million agreement with “a large telecommunications provider” to use its Intrusion Shield for its data centers. Tony Scott, CEO of Intrusion, explained, “We’ve seen an increase in the targeting of data centers for numerous businesses around the world, and this award is evidence of the effectiveness and capabilities of Intrusion Shield at scale. With this award and the other four new contracts across diverse industries we signed in the third quarter, we see signs that our go-to-market strategy with partners is working.”

While shares of INTZ stock have pulled back in recent sessions, news of insider trading have stoked some new interest this week. A 10% owner, Raymond Hyer, is the latest to buy shares of INTZ stock. The insider reported purchasing just over 306,000 shares at prices ranging from $0.32 to $0.341.

Rain Oncology (RAIN)

cancer penny stocks

This week Rain Oncology is gaining attention for several reasons, one being insider trading. The other is related to Rain’s latest headlines. The company kicked off the week with news that it received an unsolicited proposal from Concentra Biosciences to be acquired.

The proposal was from Tang Capital on behalf of Concentra and outlines the buyout at $1.25 per share. Now the deal is in the hands of Rain’s Board, who will review the proposal.

Late last week, 10% owner, Kevin Tang purchased 284,145 shares of RAIN stock. This was the second reported purchase by Tang this year. He picked up just under 1.1 million shares in May at an average price of $1.06. Yes, he is also the sole manager of Tang Capital Management, the firm that brought this proposed deal to Rain Oncology.

How to Analyze Insider Trading Disclosures to Find Penny Stocks To Buy

All insider stock purchases and sales must be reported to the SEC within two business days on Form 4. These filings are public information that can be accessed from various free online sources. Savvy penny stock traders carefully comb through recent Form 4 data to spot noteworthy buying or selling. Signs that insider activity may signal a penny stock opportunity include multiple insiders buying shares close together.

This demonstrates a consensus that the stock is undervalued. Large, abnormal purchases that significantly expand an insider’s total position also indicate strong confidence in future growth. Additionally, buying by insiders new to the stock, rather than existing shareholders only averaging down, signifies that fresh money sees value. Purchases made despite significant insider selling in recent months could mean insiders consider shares underpriced.

An increase in both the number of insiders trading and share volume traded compared to normal activity is another positive sign, as more participants buying is encouraging. Finally, trades shortly before scheduled earnings announcements or conference presentations may signal good results ahead.

– Overcoming Common Penny Stocks Trading Mistakes

If insiders at penny stocks exhibit these types of buying behaviors, it may signify major events or improvements not yet reflected in the share price. Carefully researching what insiders know and tracking their transactions can lead to discovering winners.

Risks and Rewards of Using Insider Data for Penny Stocks

While insider moves can produce huge stock gains, this strategy also has drawbacks and uncertainties to consider. There is no guarantee insiders are correct in their assessments of the company’s prospects or stock value. Their trades may fail to generate returns. Information driving insider trades could already be circulating among institutional investors, limiting additional upside.

Other factors like overall market conditions may outweigh any positive implications of insider buying when it comes to share price performance. Insiders could be trading for reasons unrelated to the company outlook, like liquidity needs or portfolio diversification.

Despite these limitations, insider trading activity remains a useful tool for identifying promising penny stocks. The key is using it as part of a holistic research process rather than blindly mimicking insider moves.

The post 3 Top Penny Stocks to Buy According To Insiders In October appeared first on Penny Stocks to Buy, Picks, News and Information | PennyStocks.com.

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Popular retailer Party City survives Chapter 11 bankruptcy

In a year when many companies have moved from Chapter 11 reorganization to Chapter 7 liquidation, one company has averted that fate.

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October 16, 2023

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Filing Chapter 11 takes a company's fate out of its hands. Once a company involves bankruptcy court, it enables a judge to have a say in its future.

That's why many companies seek to avoid filing Chapter 11 — or at least they enter it with a plan. 

The problem with having a plan is that things can go wrong. A lender can pull out or a buyer less favorable to management could offer a higher bid.

Bankruptcy courts have to make decisions that best benefit multiple constituencies. An offer that's best for shareholders, for example, might not be best for employees. 

Vendors and other creditors, of course, also play a major role in whether a company survives a Chapter 11 reorganization. In many cases, creditors must be willing to take less money or extend borrowing terms to enable a company to survive.     

It's a difficult dance, where the best option is often forcing the company into a Chapter 7 liquidation. Three recent examples of that — Bed Bath & Beyond, Tuesday Morning, and Christmas Tree Shops — all had filed Chapter 11 with hopes of reorganizing their debts and surviving, but they all ended up being liquidated.

That's not uncommon, but it's more likely these days when the cost of money has made finding loans at reasonable rates (or at all) much more difficult. So, it's maybe a bit of a surprise when a company makes it through the Chapter 11 process and goes back to normal operations.

Party City has closed some stores but will survive.

Image source: Shutterstock

Party City emerges from bankruptcy

The covid pandemic put Party City in a difficult place. People weren't having parties, so the chain basically sold merchandise that wasn't essential, or even relevant, to anyone.

That created a situation where the company, which was already struggling, burned through a lot of its cash reserves simply to survive. And even when pandemic lockdowns ended, there was no major comeback for the chain. People went back to having parties, but they did not go back to celebrate the events they missed.

Party City lost more than a year of birthdays, holidays, graduations and other celebrations, which forced the company into Chapter 11. That process enabled the company to make needed changes to emerge and get back to its prepandemic business. 

Party City Holdco Inc. has completed its restructuring and emerged from Chapter 11 financially stronger and well-positioned for the future, the company said in a news release.

"Through its restructuring, PCHI has substantially strengthened its capital structure by eliminating nearly $1 billion in debt, enhanced its liquidity, and optimized its Party City store portfolio by having negotiated improved lease terms and exited less productive stores. The company will move forward with nearly 800 Party City locations nationwide," PCHI wrote.

Party City changes leadership

Party City Chief Executive Brad Weston plans to step down as of Nov. 3 and will be succeeded on an interim basis by the chain's president, Sean Thompson.

"PCHI has emerged with an excellent foundation in place to drive long-term growth," Weston said in a statement. "At this juncture, with the restructuring now behind us, the timing is right to pass the baton to Sean, who I'm confident will build on the significant strides that have been made as PCHI continues to expand its market leadership and enhance the customer experience." 

The company emerges from bankruptcy with a new asset-based-loan facility of $562 million and $75 million in new investment to fund its ongoing operations.

PCHI has not publicly discussed its plan to search for a new CEO and whether Thompson will be a contender for the position.

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