The Washington Post - USA (2022-05-07)

A12 EZ RE K THE WASHINGTON POST.SATURDAY, MAY 7 , 2022

Economy & Business

FINANCE

Nvidia agrees to SEC

penalty in crypto case

Nvidia agreed to pay federal
securities regulators a $5.
million penalty over allegations
that the chipmaker failed to
adequately disclose revenue
from crypto mining.
During two consecutive
quarters in 2018, the company
didn’t make clear that demand
from crypto miners was
responsible for a significant part
of the increase in sales of its
graphics processing units that
are also used for gaming,
according to a Friday statement
from the U.S. Securities and
Exchange Commission. Crypto
mining is the process of
obtaining crypto rewards in
exchange for verifying
transactions on distributed
ledgers.
A Nvidia spokesman declined
to comment. The company,
which is based in Santa Clara,
Calif., agreed to the penalty
without admitting or denying
the regulator’s findings.
According to the SEC, Nvidia
omitted the information about
surging demand from crypto

miners while making statements

about how digital assets were

affecting other business lines.

The firm’s powerful

processors designed to handle

video game graphics are

considered well-suited for

mining cryptocurrencies like

Ethereum and bitcoin — and it’s

been hard to tell what task

customers are buying the

products for.

— Bloomberg News

TECHNOLOGY

China tells agencies

to use domestic PCs

China has ordered central

government agencies and state-

backed corporations to replace

foreign-branded personal

computers with domestic

alternatives within two years,

marking one of Beijing’s most

aggressive efforts so far to

eradicate key overseas

technology from within its most

sensitive organs.

Staff were asked after the

week-long May break to turn in

foreign PCs for local alternatives

that run on operating software

developed domestically, people

familiar with the plan said. The

exercise, which was mandated

by central government

authorities, is likely to

eventually replace at least 50

million PCs on a central-

government level alone, they

said, speaking on the condition

of anonymity to discuss a

sensitive matter.

The decision advances China’s

decade-long campaign to

replace imported technology

with local alternatives, a

sweeping effort to reduce its

dependence on geopolitical

rivals such as the U.S. for

everything from semiconductors

to servers and phones. It’s likely

to directly affect sales by HP and

Dell Technologies, the country’s

biggest PC brands after local

champion Lenovo Group.

The push to replace foreign

suppliers is part of a long-

standing effort to wean China

off its reliance on American

technology — a vulnerability

exposed after sanctions against

companies like Huawei

Technologies.

— Bloomberg News

ALSO IN BUSINESS

The Federal Reserve said Friday

the U.S. banking system remains

strong despite heightened

volatility and geopolitical risk,

but cautioned them against

prime brokerage services that

come with heightened risk. In

its latest bank supervision

report, the Fed offered an

upbeat take on the strength of

U.S. banks, noting they continue

to enjoy robust capital and

liquidity levels, and asset quality

improved in the second half of

2021. However, the central bank
      noted that the Russian invasion
      of Ukraine has ramped up
      potential risk for the financial
      sector.

Occidental Petroleum

shareholders rejected an

environmental group’s proposal

for the oil explorer to set more

rigorous targets for greenhouse-

gas emissions. Shareholders

voted 83 percent against the

proposal during its annual

meeting on Friday, according to

preliminary results issued by the

company. The vote was a blow to

environmental activists that

have mounted a more aggressive

campaign to pressure major oil

producers to lay out plans to

combat climate change.

Anglo American on Friday

unveiled the world’s biggest

green-hydrogen powered truck

at a platinum mine in northeast

South Africa where it aims to

replace a fleet of 40 diesel-fueled

vehicles that each use about a

million liters of the fossil fuel

every year. The NuGen project at

the Mogalakwena mine, owned

by Anglo American subsidiary

Anglo American Platinum, will

use power from a solar plant to

supply a hydrogen electrolyzer

to split water and provide the

trucks, which can carry up 315

tons of ore each, with hydrogen

fuel.

— From news services

DIGEST

BURAK KARA/GETTY IMAGES

An employee sorts eggs at Aytekin chicken farm in Bandirma,

Turkey, on Friday. Inflation soared to nearly 70 percent over one year

in April in the country, the highest since February. Egg prices in

Turkey have increased by 178 percent in a year.

○

DOW 32,899.

DOWN 98.60, 0.3% ○

NASDAQ 12,144.

DOWN 173.03, 1.4% ○

S&P 500 4,123.

DOWN 23.53, 0.6% ○

GOLD $1,882.

UP $7.10, 0.4% ○

CRUDE OIL $109.

UP $1.51, 1.4% ○

10-YEAR TREASURY YIELD 3.14%

UP 3.4%

CURRENCIES

$1=130.60 Y EN, 0.95 EUROS

higher, all major indexes regis-

tered losses. Hong Kong’s Hang

Seng Index tumbled 3.8 percent,

while the Shanghai Composite in-

dex gave up more than 2 percent.

“There will be more than a few

investors rather glad that today’s

Friday,” Danni Hewson, a financial

analyst with AJ Bell, said Friday in

comments emailed to The Post.

“Fragile is a word that’s been used

quite a bit to describe sentiment

following a slew of central bank

rate rises and disappointing out-

looks.”

Earnings season has provided

little relief for investors as the

tangle of unpredictable economic

and geopolitical tensions eats into

companies’ bottom lines.

“Pretty much across the board,

consumer-facing stocks are under

pressure from the cost-of-living cri-

sis and their own budgeting is-

sues,” Hewson said, pointing to Un-

der Armour, whose stock tumbled

more than 23 percent Friday after

the sports apparel maker recorded

a nearly $60 million net loss in the

first quarter. By comparison, it

posted a more than $77 million

profit the same period last year.

“We are continuing to serve the

needs of athletes amid an increas-

ingly more uncertain market-

place,” Patrik Frisk, Under Ar-

mour’s chief executive, said Friday

in the company’s earnings report,

citing supply chain challenges and

“emergent covid 19 impacts in Chi-

na.”

Adidas shares also sank 3.8 per-

cent after the company lowered its

2022 sales forecast, citing the Chi-

nese lockdowns and supply chain

disruptions. The German sports-

wear company reported net profits

of $327 million in the first quarter,

down 38 percent from 2021.

In Europe, markets closed in

the red across the board, with the

broader Stoxx 600 index shedding

1.9 percent as the region prepared

to enact sanctions targeting Rus-

sian oil, including a ban on petro-

leum imports.

Oil prices climbed higher in re-

sponse, with Brent crude, the in-

ternational oil benchmark, edging

up 1.8 percent to about $113 per

barrel. West Texas Intermediate

crude, the U.S. oil benchmark,

gained 1.9 percent, past $110 per

barrel.

Gold, an investor safe haven in

times of turbulence, climbed near-

ly 0.4 percent to trade at around

$1,882 per troy ounce.

BY TORY NEWMYER

The Treasury Department on
Friday issued its first sanctions
against a cryptocurrency mixer, a
service that pools digital assets to
obscure their owners, as it contin-
ues its pursuit of more than
$600 million that North Korean
hackers stole from the Axie Infini-
ty video game.
The move targets a mixer called
Blender. The hackers have used it
to process more than $20 million
of their haul since their March
attack on the game, Treasury said.
The Lazarus Group, a cyber-
criminal gang which United Na-
tions investigators have said is a
key funding source for North Ko-
rean weapons programs, had
laundered nearly $100 million as

of late last month, The Washing-

ton Post reported, citing data from

blockchain analytics firm Elliptic.

Using another mixer called Tor-

nado Cash, the hackers continued

to process batches of their stolen

crypto even after it was known

they were the thieves, highlight-

ing the challenge U.S. authorities

confront in keeping pace with

c ybercriminals rapidly moving

millions of dollars across the globe

with mere keystrokes.

“Virtual currency mixers that

assist illicit transactions pose a

threat to U.S. national security in-

terests,” Treasury undersecretary

for terrorism and financial intelli-

gence Brian Nelson said in a state-

ment. “We are taking action

against illicit financial activity by”

North Korea and “will not allow

state-sponsored thievery and its

money-laundering enablers to go

unanswered.”

Blender has processed more

than $500 million worth of bitcoin

since its 2017 launch, Treasury

said it found in an investigation of

the service. The department said

that, beyond the North Koreans, a

number of Russian-linked ran-

somware groups have used the

service to launder stolen crypto.

Blender did not respond to a re-

quest for comment.

It was not clear why Treasury

designated only Blender. “Sanc-

tions are one tool the Administra-

tion uses to counter malicious

c yber activities,” a Treasury

spokesperson said in a statement.

“Treasury will continue to assess

all available tools and authorities

to address malign activity” includ-

ing malicious North Korean cyber

activity. “This includes all nodes

within the virtual currency eco-

system such as exchanges, mixers,

and darknet marketplaces.”

Treasury noted that although

most crypto activity is legal, “it can

be used for illicit activity, includ-

ing sanctions evasion, through

mixers, peer-to-peer exchangers,

dark net markets, and exchanges.

This includes the facilitation of

heists, ransomware schemes, and

other cybercrimes.”

The department called mixers

that assist criminals “a threat to

U.S. national security interests”

and said it would continue to in-

vestigate them and “consider the

range of authorities” it has to re-

spond. “Criminals have increased

use of anonymity-enhancing tech-

nologies, including mixers, to help

hide the movement or origin of

funds,” the announcement said.

The Treasury action comes as

federal agencies take a tougher

approach to policing illicit activity

and fraud in the booming crypto-

currency industry. The Securities

and Exchange Commission earlier

this week announced it is nearly

doubling its crypto enforcement

team by adding 20 new staff mem-

bers, including investigative staff

attorneys and trial lawyers.

On Friday, the Justice Depart-

ment said it is charging Luiz Capu-

ci Jr., the chief executive of Mining

Capital Coin, with orchestrating a

$62 million global fraud scheme,

alleging he told investors he

would use their crypto funds to

mine new digital assets and in-

stead diverted them into wallets

he controlled.

Industry leaders say the sector

has been unfairly maligned as a

haven for criminal activity. They

often cite a report by blockchain

analytics firm Chainalysis that

shows while crypto crime hit a

record high last year, with illicit

accounts receiving $14 billion,

those transactions made up their

smallest share of total volume ever

in the space.

But digital thefts are rising, a

another Chainalysis report found.

Hackers focused on stealing cryp-

to are on course to break a record,

having absconded with $1.3 bil-

lion worth of digital assets in the

first three months of the year, after

seizing $3.2 billion in 2021.

Treasury sanctions crypto service that helped North Koreans launder funds

BY TAYLOR TELFORD

Wall Street ended a brutal week
with a whimper, with the Dow
landing in negative terrain as in-
vestors fretted over the dueling
threats of high inflation and rising
interest rates.
The week’s roller coaster run
saw the Dow Jones industrial aver-
age soar nearly 1,000 points on
Wednesday only to have it all evap-
orate Thursday en route to its
worst day since 2020, dragged
down by disappointing earnings
performances and rising fears of
recession. The S&P 500 and Nas-
daq also posted steep declines.
Investors seem to be lacking in
confidence that the Federal Re-
serve can bring inflation back un-
der control without triggering a
major economic slowdown, ac-
cording to David Donabedian,
chief investment officer of CIBC
Private Wealth US.
The Fed’s interest rate hike
Wednesday — the second of seven
that are forecast for 2022 — could
make borrowing more expensive
for corporations and households.
This is supposed to ease inflation-
ary pressures. But Fed officials are
attempting to raise interest rates
at such a pace that it doesn’t com-
pletely smother economic growth,
a difficult balance to strike. If the
economy cools too quickly, it could
fall into a recession, generally de-
fined as two consecutive quarters
of decline.
History has also shown that
“most Fed tightening cycles have
led to recession,” Donabedian said
Friday in comments emailed to
The Post, noting that skepticism
will likely persist until there is
clearer evidence inflation is calm-
ing down.
“For most of the last decade,
‘buy the dips’ has been a profitable
way to put cash to work,” Don-
abedian said. “But rising interest
rates and a plan to drain liquidity
from markets is a buzz kill, so ‘sell

the bounces’ may be more in vogue

for a while.”

The Dow closed Friday at

32,899.37, down 98.60 points, or

0.3 percent. The broader S&P 500

index lost 23.53, or 0.6 percent, to

end trading at 4,123.34. The Nas-

daq — which has been heavily

battered as investors dump high-

flying tech companies — dropped

173.03 points, or 1.4 percent, to

settle at 12,144.66.

The trends held despite a bet-

ter-than-expected jobs report,

which showed the United States

added 428,000 positions in April

amid a number of forces threaten-

ing economic growth. Relief about

the strength of the labor market —

with unemployment steady at a

pandemic-low of 3.6 percent —

was quickly eclipsed by concerns

about rising interest rates.

“Friday’s strong jobs number

and elevated wage growth con-

firms the Federal Reserve’s plans to

raise interest rates to cool rising

inflation, which is being driven in

part by the tight labor market and

rising wages,” said Robert Schein,

chief investment officer of Blanke

Schein Wealth Management, in

comments emailed Friday to The

Post.

“The stock market isn’t think-

ing about how the economy has

performed in recent months, but

instead what the economy will

look like over the next 6-

months,” Schein noted.

Stocks oscillated wildly this

week — soaring one day and ca-

reening the next — as investors

tried to wrap their heads around

the Fed’s approach to reining in

the rampant inflation that is seep-

ing into every aspect of American

life. Mortgage rates are now at

their highest level since 2009, ac-

cording to data out Thursday from

Freddie Mac, with the 30-year

fixed average climbing to 5.27 per-

cent. It was 2.96 percent this time

last year.

Rising mortgage rates weighed

on Zillow’s results; shares sank 4.

percent despite a beat on profit and

revenue as the real estate platform

presented a grim outlook for next

quarter, citing market uncertainty.

Though Wall Street’s fluctua-

tions appear dizzying, the reality

is that the reset is in line with

historical precedent: In the past

70 years, the S&P 500 has averaged

a maximum drawdown of 14 per-

cent annually.

Year-to-date, the S&P 500 has

dropped 13.5 percent, according to

MarketWatch, while the Dow has

declined nearly 9.5 percent and

the Nasdaq 22.4 percent.

Unease is reflected in readings

from Wall Street’s “fear gauge,” the

CBOE Volatility Index, which is up

90 percent for the year, according

to MarketWatch.

Moods were similarly sour

overseas as investors reckoned

with ongoing economic fallout

from the war in Ukraine and the

pandemic.

Asian markets declined broadly

as China’s tough pandemic restric-

tions continued to weigh on busi-

ness activity; widespread corona-

virus outbreaks have brought en-

tire cities to a standstill and hob-

bled manufacturing and shipping

hubs across the country. With the

exception of Japan’s Nikkei 225,

which closed nearly 0.7 percent

Wall Street edges lower to end b ruising week

SPENCER PLATT/GETTY IMAGES

Traders work on the floor of the New York Stock Exchange o n Friday, where stocks trended lower to cap a volatile week. Year-to-date, the

S&P 500 has dropped 13.5 percent, w hile the Dow has declined nearly 9.5 percent and the Nasdaq 22.4 percent.

Three major U.S. indexes

flashing red despite

April’s strong jobs report