Elizabeth Warren Raises Questions About Elon Musk and Twitter
Elizabeth Warren has “significant legal questions” for Elon Musk.Credit…Jacquelyn Martin/Associated Press
Elizabeth Warren has questions for Musk
Elon Musk’s chaotic tenure running Twitter has already drawn scrutiny from an array of international government officials, who have professed concern about his changes to content moderation, including the suspension of several journalists, and new restrictions on promoting rival social networks. (The Musk management style was again on display after his followers voted to give him the boot as the Twitter C.E.O. in a poll he ran overnight; more on the latest head-snapping developments later.)
Now, DealBook is first to report, Senator Elizabeth Warren, Democrat of Massachusetts, is taking aim at an issue with more serious potential legal consequences: whether Mr. Musk has created a series of conflicts of interest with and misappropriation of resources from Tesla, the electric carmaker he also runs.
“As you know, it is the legal obligation of Tesla’s board to ensure that its C.E.O. is meeting all his legal responsibilities and serving as an effective leader,” Ms. Warren wrote in a letter to Robyn Denholm, Tesla’s chairwoman, on Sunday night. (Ms. Denholm did not respond to a request for comment.) While the chaos at Twitter isn’t Tesla’s concern, Ms. Warren raised the possibility that many of Mr. Musk’s actions may be shortchanging Tesla.
Ms. Warren asked whether Mr. Musk’s diverting of resources from Tesla — including software engineers and senior executives — is harming the carmaker. In her letter, the senator also questioned whether Mr. Musk’s assertion that their being seconded to Twitter was purely voluntary, citing an anonymous employee who told CNBC, “most would also feel it was impossible to turn down a direct request from Mr. Musk without later facing poor performance reviews or other consequences.”
Ms. Warren also suggested the possibility of Mr. Musk intentionally shortchanging either Twitter or Tesla to benefit the other, including Twitter potentially overcharging Tesla for ads or tweaking the social network’s algorithms to benefit the carmaker. She also asked the board whether content appearing on Twitter under Mr. Musk’s new content moderation, including a rise in misinformation and what the senator said was hate speech, could end up hurting Tesla’s reputation.
Ms. Warren asked Tesla’s board a dozen questions about whether it was aware of the extent of the potential conflicts of interest and whether it had imposed guardrails to protect the carmaker and its shareholders. (That included asking if the board had gotten assurances that Musk wouldn’t tamper with Twitter’s algorithms to aid Tesla, to avoid antitrust violations.)
“The problems identified in this letter are not merely theoretical,” Warren wrote, noting that Tesla’s stock has fallen sharply this year and remains under pressure. That includes both the perception that Mr. Musk is distracted and his disclosure of billions of dollars worth of stock sales, with the prospect of more, which could be used to help out Twitter or meet margin requirements for loans he took out to buy the company.
It’s an argument that many Tesla investors have raised publicly, including Leo KoGuan, its third-largest individual shareholder, who tweeted last week, “Tesla needs and deserves to have working full-time C.E.O.”
Ms. Warren warned of “significant legal questions” about Twitter and Tesla’s relationship, including potential violations of corporate rules and labor laws. She added that she was asking questions so she “can evaluate current laws and current law enforcement in this area.”
There’s little love lost between Ms. Warren and Mr. Musk. The two have clashed before, including over the progressive senator’s demands to increase taxes on billionaires. Last month, Ms. Warren said, “I don’t think any billionaire ought to be the one who has that kind of power, to decide how Americans, how people around the world get a chance to talk to each other.” She added, “I got a real problem with him.”
HERE’S WHAT’S HAPPENING
China’s skyrocketing Covid cases hit factories. The consequences of Beijing’s rapid easing of zero-Covid restrictions now include pharmacies running out of medicines and depleted blood banks. That adds to concern about global supply chains, as factories and logistics companies face worker shortages.
The E.U. has charged Meta with violating competition rules. The European Commission’s antitrust enforcer says the Facebook parent’s classified ads business and its terms and conditionsharm advertisers and third-party sellers. Under competition rules, Meta faces a fine of up 10 percent of its global revenues; it can still appeal.
Global markets rebound after last week’s turbulent run. At 6:30 a.m. Eastern, stocks in Europe were gaining and U.S. futures were broadly higher. That follows last week’s dud of a performance in which the S&P 500 sank nearly 2.1 percent on investors’ mounting fears of recession, persistent inflation and higher interest rates.
What to Know About the Collapse of FTX
What is FTX? FTX is a now bankrupt company that was one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. The company, based in the Bahamas, built its business on risky trading options that are not legal in the United States.
Who is Sam Bankman-Fried? He is the 30-year-old founder of FTX and the former chief executive of FTX. Once a golden boy of the crypto industry, he was a major donor to the Democratic Party and known for his commitment to effective altruism, a charitable movement that urges adherents to give away their wealth in efficient and logical ways.
How did FTX’s troubles begin? Last year, Changpeng Zhao, the chief executive of Binance, the world’s largest crypto exchange, sold the stake he held in FTX back to Mr. Bankman-Fried, receiving a number of FTT tokens in exchange. In November, Mr. Zhao said he would sell the tokens and expressed concerns about FTX’s financial stability. The move, which drove down the price of FTT, spooked investors.
What led to FTX’s collapse? Mr. Zhao’s announcement drove down the price and spooked investors. Traders rushed to withdraw from FTX, causing the company to have a $8 billion shortfall. Binance, FTX’s main rival, offered a loan to save the company but later pulled out, forcing FTX to file for bankruptcy on Nov. 11.
Why was Mr. Bankman-Fried arrested? FTX’s collapse kicked off investigations by the Justice Department and the Securities and Exchange Commission focused on whether FTX improperly used customer funds to prop up Alameda Research, a crypto trading platform that Mr. Bankman-Fried had helped start. On Dec. 12, Mr. Bankman-Fried was arrested in the Bahamas for lying to investors and committing fraud. The day after, the S.E.C. also filed civil fraud charges.
The European Union clinches a deal on a carbon border tax. Members of the bloc agreed on how to create a tool that will force foreign companies to pay for the cost of their carbon emissions. The tax is a key element of the E.U.’s climate emissions goals, but trading partners accused Brussels of protectionism.
The latest “Avatar” falls short of expectations. Analysts had predicted that the long-awaited “Avatar: The Way of Water” would open to as much as $175 million at the box office in the U.S. and Canada; instead, it collected $134 million. But experts say that, like the record-breaking original, the film may build over the next several weeks to amass a windfall.
Argentina gets some World Cup relief from its economic crisis. Huge crowds celebrated the country’s win over France in a World Cup final for the ages, enjoying respite from punishing inflation. Also celebrating is Qatar, the soccer tournament’s host, which won the spotlight it wanted (and owns the soccer club Paris Saint-Germain, the home to the final’s major scorers, Argentina’s Lionel Messi and France’s Kylian Mbappé.)
Musk poll: Should I stay or should I go?
Speaking of Elon Musk running Twitter … the jury is in. Hours after the billionaire polled the social network’s users on whether he should step down as C.E.O., a majority have voted “yes.” (Tesla shares jumped more than 4.2 percent in premarket trading.) The move came as Mr. Musk drew more criticism, apart from Senator Elizabeth Warren’s, from even those who are usually in his corner.
A chief reason was Twitter’s sudden move to block linking to rival social networks, including Instagram and Mastodon. The vaguely worded edict — meant to apply to both promotional accounts and regular users linking elsewhere — upset even ardent Musk supporters: Paul Graham, a co-founder of Y Combinator who supported Mr. Musk’s takeover of Twitter, was suspended after protesting the policy and noting that he was now on Mastodon.
The move also risked running afoul of regulations. Popular Information’s Judd Legum noted that it might violate E.U. “gatekeeper” rules prohibiting companies from disadvantaging third-party services on their own platforms. Mr. Musk later appeared to backtrack and promised votes for major policy changes in the future. Three minutes later, he began his poll on whether to remain C.E.O.
Will Mr. Musk abide by the poll results? It’s unclear, though he has mostly done so in previous instances. Moreover, Musk has made clear that he won’t be running Twitter forever, so the results may provide cover for him to step down. However, he tweeted on Sunday night that there is no identified successor.
More Twitter news:
Mr. Musk showed up at the World Cup final in Qatar on Sunday, alongside Jared Kushner, Donald Trump’s son-in-law and former White House official. DealBook wants to know: Was he there to raise more money for Twitter? Watch an epic final match? Both?
Though Twitter reinstated some journalists’ accounts it had suspended last week for “doxxing,” it briefly suspended that of The Washington Post’s Taylor Lorenz, after she requested comment for an article.
Though Mr. Musk has accused the creator of the suspended @ElonJet account for aiding an alleged stalker, police reportedly see no link between the two.
Bankman-Fried’s big day in court
Sam Bankman-Fried, the fallen crypto mogul, is now expected to agree to extradition to the U.S., where he faces a bevy of criminal charges for the multi-billion-dollar collapse of his crypto empire FTX. He may still change his mind, but his legal fate could become clearer at his next court appearance — as soon as Monday — in the Bahamas, where he is being held.
Agreeing to extradition and exercising his right to a speedy trial could be in Mr. Bankman-Fried’s interest. Although he initially signaled he would fight extradition, S.B.F., as he is known, seems to be rethinking his predicament. Should he decide he wants the case fast-tracked, prosecutors would have just 70 days to bring the matter to trial under the Speedy Trial Act. Given the global scale of FTX’s collapse and the allegations against S.B.F., plus the long list of creditors owed billions, and the uncertainty over the whereabouts or ability to retrieve his or the company’s assets, that is very little time.
The Aftermath of FTX’s Downfall
The sudden collapse of the crypto exchange has left the industry stunned.
- A Spectacular Rise and Fall: Who is Sam Bankman-Fried and how did he become the face of crypto? The Daily charted the spectacular rise and fall of the man behind FTX.
- How FTX Operated: FTX called itself an exchange. But it was vastly different from stock exchanges, which are highly regulated and barred from engaging in many of the activities that the crypto company pursued.
- Parental Bonds: Mr. Bankman-Fried’s mother and father, who teach at Stanford Law School, are under scrutiny for their connections to their son’s crypto business.
Here’s what else is happening in crypto:
Contagion-watchers are keeping a close eye on Binance. A stampede of withdrawals from the world’s largest crypto exchange has pushed the value of its in-house token, BNB, down more than 12 percent in the past week, according to CoinMarketCap. Investors are concerned that the bankruptcy of FTX could force Binance, an early FTX investor, to give back some of the billions it has earned from doing business with the failed company.
FTX’s fall has crypto fans calling it quits, and Singapore, which has tried to become a global hub for the industry, is now rethinking its ambitions.
Celebrity crypto promoters should face closer legal scrutiny, argues the S.E.C. former head of internet enforcement, John Reed Stark.
“The uninformed vitriol, especially from the left, has been stunning. Which proves my point: so much of what passes for news is name-calling, half-truths and desperation.”
— Chris Licht, CNN’s chief executive, who amid sinking ratings has cut costs and reduced head count since taking over eight months ago and wants to make the news network less partisan.
The week ahead
Earnings and economic data will be front and center for the markets, and it’s shaping up to be a big week for Donald Trump.
Monday: The House committee investigating the Jan. 6 attack on the Capitol will hold what is likely to be its last public hearing, in which it will debate criminal referrals to the D.O.J. The committee’s final report will be made public on Wednesday.
Tuesday: Meta and the F.T.C. make closing arguments in a case that will decide whether the Facebook parent will be allowed to acquire the virtual reality start-up Within. The F.T.C. is using a novel legal strategy to argue the acquisition will hurt future competition. Elsewhere: November housing starts; Nike, General Mills and FedEx report earnings.
Wednesday: November existing home sales; Carnival, Rite Aid and Micron Technology report.
Thursday: The Commerce Department releases its final estimate of third quarter G.D.P.
Friday: The Commerce Department releases November data for the Federal Reserve’s preferred measure of inflation, the personal-consumption expenditures price index. Also: November new home sales, University of Michigan consumer sentiment; U.S. bond markets close early for the holiday weekend.
THE SPEED READ
The S.E.C. is reportedly asking questions of Blackstone about its move to limit redemptions from its major real estate investment fund. (Bloomberg)
The defense contractor L3Harris agreed to buy Aerojet Rocketdyne for $4.7 billion. (WSJ)
The designer Stella McCartney and LVMH are backing a venture capital fund that focuses on sustainable fashion technologies. (FT)
U.S. officials are weighing tougher rules on private Medicare Advantage plans amid complaints of excessive claim denials and misleading marketing. (NYT)
The president of Toyota, Akio Toyoda, urged policymakers to include hybrid and hydrogen-powered cars in their plans, and not just focus on electric vehicles. (WSJ)
Best of the rest
How Bob Iger reportedly undermined his successor as Disney’s C.E.O., Bob Chapek, before returning to lead the entertainment giant. (WSJ)
“Streaming’s Golden Age Is Suddenly Dimming” (NYT)
We’d like your feedback! Please email thoughts and suggestions to [email protected].