How GIC and Temasek are managing your money

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Andrew Willans
Andrew WillansAndrew Willans• 3rd+• 3rd+Private Real EstatePrivate Real Estate
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VC due diligence - how it started & how its going …
Temasek did 8 months of due diligence on its investment in FTX. Temasak said:

“Similar to all investments, we conducted an extensive due diligence process on FTX, which took approximately 8 months from February to October 2021. During this time, we reviewed FTX’s audited financial statement, which showed it to be profitable…In addition, our due diligence efforts focused on the associated regulatory risk with crypto financial market service providers, particularly licensing and regulatory compliance”

Temasek - Singapore

"Alameda is un-auditable... we are only able to ballpark what its balances are, let alone something like a comprehensive transaction history. We sometimes find $50m of assets lying around that we lost track of; such is life" according to Sam Bankman-Fried

The following are excerpts from the First Interim Report of John J. Ray III to the Independent Directors on Control Failures at the FTX Exchanges) filed on April 9, 2023:

"Thousands of deposit checks were collected from the FTX Group’s offices, some stale-dated for months, due to the failure of personnel to deposit checks in the ordinary course; instead, deposit checks collected like junk mail."

“Accounts were opened using names and email addresses that were not obviously linked to FTX, using pseudonymous email addresses, in the names of shell companies created for these purposes, or in the names of individuals (including individuals with no direct connection FTX)”

"The FTX group had no cybersecurity staff whatsoever."

"FTX stored private keys to its crypto wallets in AWS."

"Fifty-six entities within the FTX Group did not produce financial statements of any kind."

"Approximately 80,000 transactions were simply left as unprocessed accounting entries in catch-all QuickBooks accounts titled 'Ask My Accountant.'"

"Transfers in the tens of millions of dollars were approved via Slack emoji, or discussed in disappearing Signal or Telegram chats."

“FTX had "an environment in which a handful of employees had, among them, virtually limitless power to direct transfers of fiat currency and crypto assets and to hire and fire employees, with no effective oversight or controls to act as checks on how they exercised those powers."

Eight months of due diligence is a lot.

Above info courtesy of Molly White's Twitter Feed.

 

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Singtel-owned Optus hit with class-action lawsuit over 2022 cyber-security breach​

More than 100,000 current and former customers have joined a class-action lawsuit against Australian telco Optus. PHOTO: OPTUS

Apr 21, 2023

SYDNEY – More than 100,000 current and former customers have joined a class-action lawsuit against Australian telco Optus, a subsidiary of Singtel, over a cyber-security breach in 2022 that compromised the data of roughly 1.2 million customers, lawyers said on Friday.
Starting with the Optus breach in September, a spate of cyber attacks on Australia’s corporate sector has exposed the data of tens of millions of customers online and led the government to set up a new cyber-security body and overhaul rules that the Minister for Home Affairs and Cyber Security has described as “bloody useless”.
A claim lodged in the federal court by law firm Slater and Gordon on Friday alleged that Optus breached laws and its own policies by failing to adequately protect customer data and destroy or de-identify former customer data, according to a statement from the firm.
In a statement on Friday, Optus said it has yet to be served with any court documents on the matter. “As previously announced, any class action will be vigorously defended,” said the telco.
Members in the lawsuit want compensation for the time and money required to replace identity documents and for distress, frustration and disappointment caused by the breach. The statement did not specify an amount.
Claimants include a stalking victim who fears her life has been put in danger, the statement said. Slater and Gordon’s head of class actions Ben Hardwick said the breach has potentially put vulnerable customers at risk of domestic violence and other crimes.
“Very real risks were created by the disclosure of this private information that Optus customers had every right to believe was securely protected by their telecommunications and Internet provider,” Mr Hardwick said. REUTERS

 

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Keppel faces $59.3 million civil claim over Australian solar farm project​

Sunshine Energy Australia and Australia Energy Group allege that Keppel Renewable Energy breached a mutual confidentiality agreement. ST PHOTO: MARK CHEONG
Michelle Zhu

Apr 24, 2023

SINGAPORE – Civil proceedings have commenced against three of Keppel Corp’s subsidiaries – Keppel Renewable Energy (KRE), KRE Anchorage and Keppel Renewable Energy Australia (KREA) – claiming up to A$66.5 million (S$59.3 million).
On Monday, Keppel said Sunshine Energy Australia and Australia Energy Group (AEG) alleged that KRE breached a mutual confidentiality agreement regarding a solar power project, and that its subsidiary KRE Anchorage was “knowingly involved”.
Keppel in December 2020 announced plans to acquire a 45 per cent stake in Harlin Solar from veteran developer Anthony John Youssef, through KRE Anchorage, to develop, construct and operate a solar farm in Queensland, Australia.
KRE Anchorage was to take the lead role in developing and managing the construction and operation of Harlin Solar Farm.
Under the civil claim, Sunshine Energy and AEG alleged that KREA had entered into an agreement with Harlin Solar regarding the development of this solar farm – the KRE subsidiaries, along with Harlin Solar and Mr Youssef, obtained the benefit of such an agreement “to the applicants’ detriment”.
Keppel said its subsidiaries deny all the allegations and “will vigorously defend the claim”.
The group does not expect the proceedings to have a material impact on the group’s operations and overall financial performance.

 

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Forum: SIA not the only airline that faced pandemic-related supply issues​

May 26, 2023

I refer to the response from Singapore Airlines (SIA) to the recent online flak over its food quality and use of paper tableware (SIA brings back appetisers for economy flights 3½ hours and longer, May 26).
SIA cited supply issues during the Covid-19 pandemic among other reasons for appetisers previously not being available for its economy class meals. Why, after months of borders reopening, was it still facing such issues when other airlines seemed to have fully recovered?
For instance, I recently flew on a Middle Eastern airline on one leg and returned via SIA, and was able to compare the standards of both airlines.
The Middle Eastern airline offered a bread roll, a salad and dessert. SIA did not have salad and dessert. Instead, it gave packaged cream crackers and a small tub of yogurt, all of which would have maintained their taste whether served that day, the next week or month, without the work associated with desserts and salads.
I’m surprised that in this competitive industry, instead of thinking of how to get ahead of competitors, SIA seems to have taken measures that go the other direction.
Or has the thinking changed to one that feels people will pay a premium just to fly with a brand name, never mind the quality? When the quality isn’t commensurate with the price premium, customers will flee.
The paper tableware was touted as being able to retain heat and moisture better. While the material does retain heat, it actually absorbs the moisture from food with gravy, making the dish drier.

A more contrite and honest admission that the experiment didn’t go down well would have earned SIA kudos for its sincerity. Pointing to supply chain issues will not dovetail with the experiences of passengers who also fly with other airlines.

Peh Chwee Hoe

 

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Forum: SIA should share profits with nation after having received govt assistance​

May 27, 2023


I was delighted to learn that Singapore Airlines (SIA) registered record revenue and profit for the current financial year and will be giving a profit-sharing bonus of 6.65 months to eligible staff (SIA posts record revenue and earnings, expects robust travel demand to prevail in 2023, May 16).
It is encouraging to note that the company is bouncing back from the challenges posed by the Covid-19 pandemic.
The company could perhaps now consider sharing the fruits of its success with the country since it, like many other businesses, received much support from the Government throughout the three years of the Covid-19 pandemic.
Among the financial assistance packages the Government gave out during the period of lockdowns and restricted travel were the Aviation Sector Assistance Package and the OneAviation Resilience Package.
As we celebrate SIA’s success, I urge its senior management to consider contributing a part of its gains to the country’s reserves as a good national cause and a show of appreciation for the help it received from the Government during the Covid-19 crisis.
SIA deserves praise for the resilience it showed to steer itself back to growth and I wish it all the best in its business endeavours.

Chng Kok Hui

 

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Temasek cuts compensation of senior team, takes ‘collective accountability’ over failed FTX investment​

Temasek said it has drawn learnings from the FTX incident. PHOTO: ST FILE

Lee Su Shyan
Associate Editor & Senior Columnist

May 29, 2023

SINGAPORE - Temasek said it has cut the compensation of its senior management and the investment team involved in the failed investment in FTX, as they take accountability for the reputational damage suffered by Singapore’s investment company.
This was disclosed in a statement issued on Monday by Temasek chairman Lim Boon Heng.
Mr Lim said: “An independent team has conducted an internal review of the investment and the findings were directly presented to the Board Risk and Sustainability Committee, and to our board.
“Although there was no misconduct by the investment team in reaching their investment recommendation, the investment team, and senior management, who are ultimately responsible for investment decisions made, took collective accountability and had their compensation reduced.”
Temasek added that it has drawn learnings from this incident, such as strengthening the approach on reviewing the governance, management and controls of a portfolio company, especially if it is fast-growing.
The previously high-flying FTX, led by founder Sam Bankman-Fried, collapsed in November 2022 after a damaging report by CoinDesk involving trading firm Alameda Research, which was affiliated to FTX.
Temasek invested US$210 million (S$284 million) in FTX International and US$65 million in FTX US across two funding rounds from October 2021 to January 2022. The investment in FTX represented 0.09 per cent of Temasek’s net portfolio value of $403 billion as at March 31, 2022.

While Temasek held a 1.5 per cent stake in FTX, it was one of the exchange’s largest external investors. Other big-name investors included Sequoia Capital and Canada’s Ontario Teachers’ Pension Plan. Temasek did not have a board seat.
Questions were raised in Parliament in 2022 about FTX. Deputy Prime Minister Lawrence Wong then responded that the loss did not mean Temasek’s governance system was not working, and no amount of due diligence and monitoring could eliminate the risks altogether. He added that Temasek had also embarked on an internal review by an independent team that was “separate from the investment team” and would report findings to the board.
In the Temasek statement, Mr Lim noted that with FTX, “as alleged by prosecutors, and as admitted by key executives at FTX and its affiliates, there was fraudulent conduct intentionally hidden from investors, including Temasek”.


Mr Lim acknowledged that the investment firm was disappointed with the outcome of the investment and the negative impact on its reputation. While there was no misconduct on the part of the investment team, the investment team and senior management took collective accountability.
No details were given on the quantum of the cut. The Straits Times understands that the compensation reduction was a one-off as the FTX investment was an exceptional one that had a negative impact on Temasek’s reputation. This reduction has already taken place.
Temasek’s senior management is led by its chief executive Dilhan Pillay Sandrasegara.
Mr Lim also explained Temasek’s rationale for investing in early-stage companies as it seeks to deliver sustainable returns over the long term.
“While there are inherent risks whenever we invest, we believe that we have to invest in new sectors and emerging technologies to understand how these areas may impact the business and financial models of our existing portfolio, and whether they would be drivers of future value in an ever-changing world,” Mr Lim said.
Following on from this, Temasek aims to enhance its investment evaluation process. Chief financial officer Png Chin Yee said: “We will use this experience to further strengthen our approach on reviewing the governance, management and controls of a company based on the nature of the business, whether it is an early-stage or mature company. This is especially so if the company is growing rapidly.”

Temasek also plans to beef up the way it assesses the risk level of various business models. It will also enhance the due diligence on founders and the management team, as well as the operational robustness of such companies that undergo rapid growth.
The firm added that it will continue to not invest in cryptocurrencies and will also be circumspect when considering new investments in the blockchain space. FTX was the only direct investment Temasek had in a digital asset exchange.

 

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FTX blow-up is ‘an aberration’ in early stage investments: Temasek CEO​

(From left) Temasek’s chief investment officer Rohit Sipahimalani, deputy chief executive Chia Song Hwee, executive director and CEO Dilhan Pillay and chief financial officer Png Chin Yee at the annual Temasek Review on July 11. ST PHOTO: JASON QUAH

Claire Huang
Business Correspondent

July 11, 2023

SINGAPORE - The blow-up of disgraced American cryptocurrency exchange FTX is “an aberration” in early stage investments, Temasek Holding’s chief executive said, adding that it is “very difficult” to determine how an investment will turn out from the start.
In early stage investing, one has to accept the binary outcome of the investment, said Mr Dilhan Pillay, who is also Temasek’s executive director.
He said in the case of FTX, which resulted in the group writing off its US$275 million (S$369 million) bet on the firm, the blow-up was to do with what is perceived to be individual actions, in a reference to FTX founder Sam Bankman-Fried.
Bankman-Fried is accused of conspiracy to commit mail and wire fraud, as well as orchestrating the theft of billions of dollars of customer assets, following the collapse of FTX in November 2022.
Temasek said in late May that it would cut the pay of its investment team and senior management as a result of the FTX debacle, although no misconduct was found. The one-off pay cut was reported to have been carried out.
Speaking at the Singapore state investor’s annual review on Tuesday, Mr Pillay said the investment team and senior management decided to take a pay cut because of the reputational damage from the FTX incident, particularly as the implosion came so soon after the investment was made. Temasek had pumped money into FTX across two funding rounds from October 2021 to January 2022.
When asked why no one was let go as a result of Temasek’s poor investment in FTX, Mr Pillay said: “If you were to start to punish people beyond what we’ve done, who would want to be an investor?”

He added that as an investor, one takes calibrated risks, and “as long as you’ve done the work required to make the investment, the committee approves it, it goes forward”.
However, should an investment turn sour and negatively impact Temasek’s reputation, more punitive actions such as pay cuts could be taken, Mr Pillay said.
This is “to remind ourselves that every time we do something, the issue is not just the financial risk associated with the investment, it’s the reputational risk associated with us, and we take that very seriously,” he said.

Mr Pillay noted that most of Temasek’s investments have done well and very few have done very badly, like FTX. Others had started off performing well but became progressively worse, either due to external market conditions or internal conditions.
The state investor had held a 1.5 per cent stake in FTX and the investment constituted 0.09 per cent of its $403 billion portfolio as at end March 2022.
The group was one of the exchange’s largest external investors, alongside Sequoia Capital and Canada’s Ontario Teachers’ Pension Plan. In November 2022, Sequoia wrote down the full value of its US$214 million investment in FTX.
Mr Rohit Sipahimalani, Temasek’s chief investment officer, said at the briefing that “FTX clearly was a situation we’re all disappointed with”.
He said Temasek caps the exposure to early-stage companies at 6 per cent of its total portfolio, of which half are venture capital funds and the other half comprise over 200 companies that included FTX.
“We invested in FTX because at that time, it seemed like a company having good technology, it was rapidly gaining market share and all the checks with regulators suggested that they were very regulatory compliant and wanted to get licensed everywhere, so all that led us to invest in that company,” said Mr Sipahimalani.

He added that lessons have been learnt and that the group has enhanced its due diligence processes in the hopes of avoiding such situations in future, while “recognising that fraud is something that is difficult to protect against completely”.
Looking ahead, the group has built what it calls the “Temasek operating system” as part of its 2030 strategy.
This refers to a suite of specialised, next-generation capabilities in five areas – artificial intelligence (AI), blockchain, cyber security, data and digital, and sustainable solutions.
Temasek’s deputy chief executive Chia Song Hwee said these capabilities will be essential for the future and could differentiate the group as a value-adding investor and shareholder.
For now though, the group is trying to understand more about the business-to-business applications of AI and its investment in this area is “still a very small portion” of the portfolio, he said.
Mr Sipahimalani said the group will continue to invest in established tech companies as it is clear they will be winners, but said Temasek is less excited about investing directly in some of the start-ups for now as their revenue models are unclear and valuations are high.

 

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When Temasek bought, Ant was valued at US$150 billion.
It is now valued at US$78.8 billion.
A loss of 48%

Singapore’s Temasek seeks talks with Ant on buyback valuation​

Bloomberg
Wed, 12 July 2023

Rohit Sipahimalani, chief investment officer of Temasek Holdings Pte, speaks during a news conference in Singapore, on Tuesday, July 11, 2023. Singapore's state-owned investor Temasek warned of an uncertain road ahead as it chalked up its worst showing in seven years. (Bloomberg)
By David Ramli and Low De Wei
(Bloomberg) — Singapore state-owned investor Temasek Holdings Pte is set to hold talks with Ant Group Co. to understand why it slashed its valuation before it decides whether to take part in a planned share buyback, according to Chief Investment Officer Rohit Sipahimalani.
Temasek bought shares in the Alibaba Group Holding Ltd.-affiliated finance company in 2018, when it was valued at US$150 billion, according to an Ant prospectus in 2020. Ant’s planned repurchase of stock announced on the weekend would value the company at about 567.1 billion yuan (US$78.8 billion).
“With the recent developments around Ant, a line in the sand has been drawn and that should be good for the company,” Sipahimalani said in an interview, adding Ant was holding talks with all major holders. “Investors have to make their own call whether they need the liquidity or where they see the outlook for the business.”
Alibaba had earlier said it was considering participating in a proposed Ant buyback. The fintech giant plans to repurchase as much as 7.6% of its shares after being ensnared by a years-long regulatory crackdown that culminated last week with a fine of almost $1 billion from Chinese regulators. The buyback valuation is almost 70% lower than an estimated US$280 billion market capitalization in 2020 before it scrapped an initial public offering.
Temasek is among holders of Ant’s private shares. Each investor would be allowed to sell up to 7.6% of their equity rather than cashing out completely, Bloomberg News has reported.

China tension​

Global investors are trying to decide whether the political and consumer challenges facing companies in China are a buying opportunity or substantial risk to their portfolio. About 22% of the Singaporean firm’s net portfolio value is based in China, making it a key concern.
Temasek on Tuesday warned of an uncertain road ahead as it chalked up its worst showing in seven years. The investor with S$382 billion (US$284 billion) in assets posted a decline of 5.1% for the fiscal year ended March 31.
The firm has continued to back Chinese companies this year, adding to holdings in US-listed shares of Alibaba and its rival e-commerce provider JD.Com Inc. during the first quarter of 2023, according to 13F filings.
That’s despite Sipahimalani warning that key sectors in China are facing major challenges, from consumer sentiment to the property sector. China’s benchmark CSI 300 is among the worst-performing indexes in Asia-Pacific this year, prompting foreign funds to cut exposure as the economy weakens and relations with the US remain tense.
“I think it’s going in one direction only – I don’t think that’s going to reverse,” Sipahimalani said of the growing geopolitical tensions between the US and China. Temasek favors companies with access to large domestic markets that aren’t caught in the cross-hairs. “That’s just sensible investing right now,” he told Bloomberg Television.

 

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SG signed CECA agreement so that Temasek can invest in India.
Temasek and its highly-paid management benefits but who loses?
Sinkies who lose their jobs to the workers coming from India.

Mahindra’s EV unit raises funds from Temasek at $13.1b valuation​

Mahindra and Mahindra is aggressively trying to lift the share of its electric SUVs to catch up with rival Tata Motors. PHOTO: REUTERS

August 4, 2023

BENGALURU – Mahindra and Mahindra has raised US$145 million (S$195 million) from Temasek for its electric vehicle unit at a valuation of up to 805.8 billion rupees (S$13.1 billion), the latest fundraising by the Indian automaker as it looks to ramp up EV sales.
Temasek will take up to a 3 per cent stake in the company that in 2022 raised up to US$250 million from British International Investments (BII) at a valuation of as much as US$9.1 billion.
The automaker is aggressively trying to lift the share of its electric SUVs in a market that is dominated by larger rival Tata Motors, as the government pushes to grow EV sales to 30 per cent by 2030 from less than 2 per cent today.
Mahindra said it expects electric models to make up between 20 and 30 per cent of its total SUV sales by March 2030 – pushing back an outlook it gave in 2022 of meeting that target by 2027.
“Temasek’s investment is a step forward, as we execute our strategy towards future leadership in electric SUVs,” Mahindra CEO Anish Shah said in a news release.
India’s EV market is small but growing, attracting interest from global players including Tesla.
The world’s biggest EV maker is in talks with the government to invest in a potential factory that would build low-cost EVs, targeting a price of around US$24,000.


Analysts say this could pose stiff competition for local automakers.
Rival Tata Motors in 2021 raised US$1 billion from TPG’s Rise Climate Fund at a valuation of about US$9.1 billion.
Mahindra has been in talks with global investors, including green funds and private equity players, for nearly a year to raise between US$250 million and US$500 million to accelerate its EV plans. REUTERS

 

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More plaintiffs added to US class action suit involving Temasek and other investors of FTX​

The lawsuit states that FTX violated several securities laws and stole customers’ funds. PHOTO: REUTERS

Claire Huang
Business Correspondent

AUG 10, 2023


SINGAPORE - More plaintiffs have been added to the United States class action suit involving Singapore state investor Temasek, along with more than a dozen backers of failed American cryptocurrency exchange FTX.
The amendment to include more plaintiffs was filed on Monday with the US District Court for the Northern District of California by five plaintiffs – Mr Leandro Cabo, Mr Vitor Vozza, Mr Kyle Rupprecht, Mr Warren Winter and Mr Sunil Kavuri.
Besides Temasek, venture capital firms Sequoia Capital, SoftBank and Sino Global Capital were also named as defendants in the lawsuit relating to fraud.
The lawsuit states that FTX violated several securities laws and stole customers’ funds, while the defendants offered an elusive picture of the exchange, claiming they had done their due diligence, reports said.
The plaintiffs are accusing the defendants of perpetrating, conspiring, aiding and abetting FTX’s multibillion-dollar fraud for the latter’s own financial and professional gain.
When asked, Temasek declined to comment.
It is understood that this lawsuit is the same as an earlier one filed in February.

In February, Temasek, together with 17 banks, venture capitalists and accounting firms, were sued for allegedly conspiring with FTX to defraud investors.
That 83-page class action lawsuit was filed in Miami, Florida, by FTX investor Connor O’Keefe, whose funds were frozen in his FTX account since the November collapse of the exchange. Venture capital firms Sequoia Capital and SoftBank Vision Fund were also named in the case.
In mid-November 2022, Temasek announced it would write off its US$275 million (S$377 million) investment in FTX, a week after the exchange filed for bankruptcy.
Two weeks later, Deputy Prime Minister Lawrence Wong, who is also Finance Minister, told Parliament that the Temasek write-off would not affect the stream of income from the reserves available for the Government’s Budget, or the Net Investment Returns Contribution.
In late May, Temasek said it would cut the pay of its investment team and senior management as a result of the FTX debacle, although no misconduct was found. The one-off pay cut has been carried out.
More recently, in mid-July, Temasek’s chief executive Dilhan Pillay said during the group’s annual review that the FTX blow-up was “an aberration” in early stage investments.
He noted that the investment team and senior management decided to take a pay cut because of the reputational damage Temasek has sustained from the FTX incident, particularly as the implosion came so soon after the investment was made. Temasek had pumped money into FTX across two funding rounds from October 2021 to January 2022.
When asked why no one was let go as a result of Temasek’s poor investment in FTX, Mr Pillay had made the point that no one would want to be an investor if people were punished beyond the pay cut.

 

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More plaintiffs added to US class action suit involving Temasek and other investors of FTX​

The lawsuit states that FTX violated several securities laws and stole customers’ funds. PHOTO: REUTERS

Claire Huang
Business Correspondent

AUG 10, 2023

SINGAPORE - More plaintiffs have been added to the United States class action suit involving Singapore state investor Temasek, along with more than a dozen backers of failed American cryptocurrency exchange FTX.
The amendment to include more plaintiffs was filed on Monday with the US District Court for the Northern District of California by five plaintiffs – Mr Leandro Cabo, Mr Vitor Vozza, Mr Kyle Rupprecht, Mr Warren Winter and Mr Sunil Kavuri.
Besides Temasek, venture capital firms Sequoia Capital, SoftBank and Sino Global Capital were also named as defendants in the lawsuit relating to fraud.
The lawsuit states that FTX violated several securities laws and stole customers’ funds, while the defendants offered an elusive picture of the exchange, claiming they had done their due diligence, reports said.
The plaintiffs are accusing the defendants of perpetrating, conspiring, aiding and abetting FTX’s multibillion-dollar fraud for the latter’s own financial and professional gain.
When asked, Temasek declined to comment.
It is understood that this lawsuit is the same as an earlier one filed in February.

In February, Temasek, together with 17 banks, venture capitalists and accounting firms, were sued for allegedly conspiring with FTX to defraud investors.
That 83-page class action lawsuit was filed in Miami, Florida, by FTX investor Connor O’Keefe, whose funds were frozen in his FTX account since the November collapse of the exchange. Venture capital firms Sequoia Capital and SoftBank Vision Fund were also named in the case.
In mid-November 2022, Temasek announced it would write off its US$275 million (S$377 million) investment in FTX, a week after the exchange filed for bankruptcy.
Two weeks later, Deputy Prime Minister Lawrence Wong, who is also Finance Minister, told Parliament that the Temasek write-off would not affect the stream of income from the reserves available for the Government’s Budget, or the Net Investment Returns Contribution.
In late May, Temasek said it would cut the pay of its investment team and senior management as a result of the FTX debacle, although no misconduct was found. The one-off pay cut has been carried out.
More recently, in mid-July, Temasek’s chief executive Dilhan Pillay said during the group’s annual review that the FTX blow-up was “an aberration” in early stage investments.
He noted that the investment team and senior management decided to take a pay cut because of the reputational damage Temasek has sustained from the FTX incident, particularly as the implosion came so soon after the investment was made. Temasek had pumped money into FTX across two funding rounds from October 2021 to January 2022.
When asked why no one was let go as a result of Temasek’s poor investment in FTX, Mr Pillay had made the point that no one would want to be an investor if people were punished beyond the pay cut.

 

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SingPost delivery business in S’pore lost $16m in 2022; review of postal industry under way​

Mail volumes have declined while logistics and e-commerce firms have grown their delivery capabilities. ST PHOTO: NG SOR LUAN

Osmond Chia

OCT 4, 2023

SINGAPORE – Singapore Post (SingPost) incurred an operating loss of $16 million in its post and parcel business in 2022, amid declining mail volumes and competition from logistics and e-commerce firms that have expanded their delivery capabilities.
These changes in the postal market have driven up the costs of sending mail, said Senior Minister of State for Communications and Information Tan Kiat How in Parliament on Wednesday, as he explained the rise in postal prices by 20 per cent to 51 cents for standard mail from next Monday.
Mr Tan was responding to questions from MPs, including Workers’ Party MP Jamus Lim (Sengkang GRC), who asked whether the Infocomm Media Development Authority (IMDA) had considered SingPost’s $38.8 million profit in the last financial year (FY) when it reviewed the company’s decision to raise postage rates.
Mr Tan said the postal landscape has changed dramatically in the last decade, prompting the first major increase in postage rates since 2014 so that the licensed public postal company can deliver letters to every address in Singapore. In 2014, postage prices rose from 22 cents to 30 cents.
While SingPost’s overall business was profitable in FY2022, more than 90 per cent of its profits came from its logistics business, and largely from its overseas investments, said Mr Tan.
“SingPost’s core business in Singapore is post and parcel, which incurred operating losses of $16 million,” he said. “This is due to the global decline in letter mail, as well as intense competition from logistics companies and e-commerce players growing their own parcel-delivery capabilities. As a result, per-letter delivery costs have risen considerably.”
The price increase is designed to support SingPost’s domestic business to ensure that it is able to sustain itself and not rely on its performance elsewhere, said Mr Tan.

“I think we have to make clear that this is not the regulatory framework which we are operating under,” he said. “The revenues and the profits from (Singapore are) not supposed to offset the losses in other businesses, and vice versa.”
SingPost will provide a booklet of 10 free stamps worth 51 cents each to every household. This is likely to cover a household’s postage fees for roughly a year, as the average consumer sends less than one item of mail a month, Mr Tan said.
Professor Lim asked if there is a more efficient approach than raising costs, which will spill over to key customers like large corporations and the Government.

Mr Tan said the Government contributes to only a small proportion of the mail volume in Singapore, and that separate reviews by the Government and SingPost are being carried out to assess the future of post and its operations amid greater digitalisation and lower demand for mail.

Mr Yip Hon Weng (Yio Chu Kang) asked if SingPost needed approval from IMDA before raising the rates and whether the authority had taken into account the projected revenue SingPost would make in the light of the increase.
Mr Tan said IMDA had approved SingPost’s request to raise rates to reflect the cost of delivering letters. The new prices are also comparable to those of countries like Japan and the United States.
There is no guarantee that the increase in postage will improve the financial position of SingPost, as the boost in revenue may not compensate for the decline in letter volumes if customers opt for more digital options, Mr Tan added.

SingPost is expected to revamp its post and parcel business here to remain efficient, said Mr Tan, without going into specifics. “This is a move that could put SingPost on a more sustainable path to fulfil its obligations as a public postal licensee.”
SingPost said previously that mail volume declined by more than 40 per cent between 2018 and 2023, and that the price increase will address rising costs in labour, utilities and transport.
Postage rates under the current structure are set according to different weight tiers and dimensions, ranging from 20g to 500g, and sizes of up to 162mm by 240mm by 6mm for standard regular basic mail.
For example, the postage for standard regular basic mail weighing up to 20g is now 31 cents, and 38 cents if it weighs up to 40g.
From next Monday, sending standard regular basic mail that measures up to 162mm by 240mm by 6mm – roughly A5-sized – and weighs up to 500g will cost a flat 51 cents. Sending A4-sized mail weighing up to 500g will cost 80 cents.

 

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FTX co-founder testifies he committed multi-billion-dollar fraud with Bankman-Fried​

Former FTX developer Adam Yedidia also testified at the trial of Sam Bankman-Fried in New York on Oct 4, 2023. PHOTO: AFP

OCT 6, 2023

NEW YORK – FTX co-founder Gary Wang said he and Sam Bankman-Fried committed a multi-billion-dollar fraud with customer funds that led to the cryptocurrency exchange’s collapse, shortly after taking the stand against his one-time maths camp buddy and Massachusetts Institute of Technology (MIT) roommate.
Dressed in a gray suit and red tie, Wang, 30, did not make eye contact with Bankman-Fried as he entered the Manhattan courtroom on Thursday afternoon to testify as a government witness.
Prosecutors claim Bankman-Fried orchestrated a scheme in which billions of dollars in FTX customer funds were secretly transferred to affiliated hedge fund Alameda Research.
The testimony by Wang, who pleaded guilty to fraud and agreed to cooperate against his one-time friend in December, promises to be among the most powerful the government puts on against Bankman-Fried.
Wang, also FTX’s chief technology officer, said Bankman-Fried directed him to alter the cryptocurrency exchange’s code so that Alameda was able to draw a US$65 billion (S$89 billion) line of credit.
“It withdrew so much that FTX was not able to pay customers who tried to withdraw,” Wang said.
Wang initially appeared nervous and spoke quickly on the stand, though he seemed to become more at ease as questioning continued.

His testimony on Thursday was relatively brief, but he is expected to return to the stand on Friday.

‘We are not equal’
As an FTX co-founder, Wang was once a billionaire, though he said his wealth never matched that of Bankman-Fried, who was estimated to be worth US$26 billion before the exchange’s collapse.

The unequal relationship extended to Alameda, Wang said, where he owned 10 per cent of the firm and Bankman-Fried had 90 per cent.
And Bankman-Fried had the final say on most business decisions.
“We are not equal,” Wang testified.
He said Bankman-Fried carefully oversaw the process by which FTX’s top brass were able to borrow hundreds of millions of dollars from Alameda.
“He told us what things to be implemented”, such as how much collateral was needed for certain positions and limits on how much people can deposit or withdraw, Wang testified.
Wang’s testimony potentially undercuts Bankman-Fried’s contention that he was not closely involved with the running of Alameda and relied instead on its chief executive Caroline Ellison, who is also his former girlfriend.
Bankman-Fried’s lawyers are arguing that he made mistakes but had no ill intent.
Ellison has also pleaded guilty to fraud and her testimony was touted by prosecutors in opening statements on Wednesday.
Earlier on Thursday, Mr Adam Yedidia, another MIT classmate who went to work at FTX, testified that Bankman-Fried was aware and concerned about a potential US$8 billion shortfall at FTX from loans to Alameda five months before both companies collapsed.
Mr Yedidia told jurors he was testifying under a grant of immunity from prosecution.
“It concerned me,” Mr Yedidia testified. “It seemed like a lot of money for Alameda to be owing FTX. And I wanted to be certain that Alameda could repay that debt.”
Mr Yedidia said he raised the issue with Bankman-Fried in a conversation outside the US$35 million luxury Bahamas penthouse that they shared with eight other people.
“Are things okay?” he said he asked.

Not ‘bulletproof’
“In response, Sam said something like, ‘We were bulletproof last year. We’re not bulletproof this year’,” Mr Yedidia testified, adding that Bankman-Fried appeared nervous and worried.
Mr Yedidia said that was atypical of the friend he had known for many years.
Mr Yedidia testified that he received a US$6 million cash bonus at the end of 2021, which he immediately invested it in FTX stock.
Though his base salary was between US$175,000 and US$200,000, Mr Yedidia said he received several millions of dollars in cash bonuses and stock options.
In its cross-examination of Mr Yedidia, the defence tried to downplay Bankman-Fried’s own wealth, comparing the Bahamas penthouse to a dorm and asking Mr Yedidia if he ever witnessed his friend buying watches, sports cars, yachts or fancy clothes.
Mr Yedidia said he did not.
“I didn’t see him wearing any fancy clothes,” he testified. BLOOMBERG

 

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‘FTX was not fine’: Co-founder Wang says Bankman-Fried lied in tweet​

Gary Wang exiting court in New York on Oct 6, where he provided dramatic descriptions of FTX’s last days. PHOTO: BLOOMBERG
UPDATED

OCT 7, 2023

NEW YORK – A few days before FTX filed for bankruptcy, Sam Bankman-Fried sent out a tweet reassuring customers and investors that the cryptocurrency exchange and its assets were in good shape.
Bankman-Fried’s FTX co-founder, Gary Wang, testified on Friday that was a lie.
“FTX was not fine, and the assets were not fine,” Wang, 30, said in his second day as a prosecution witness in Bankman-Fried’s fraud trial in a Manhattan federal court.
In more than four hours on the stand, Wang provided dramatic descriptions of FTX’s last days and painstaking detail on how he and Bankman-Fried, 31, allegedly implemented a multibillion-dollar scheme that made the exchange’s collapse inevitable.
Wang, who pleaded guilty last December and agreed to cooperate, went into granular detail about how he, allegedly at Bankman-Fried’s direction, altered the cryptocurrency exchange’s backend code in 2019.
The resulting “special advantage” allowed Alameda Research, an affiliated hedge fund, to borrow essentially unlimited funds from FTX customers. By autumn 2022, Alameda had borrowed as much as US$14 billion (S$19 billion) from FTX, an amount it could not repay.
He knew it was wrong, said Wang.

“The money belonged to customers, and the customers did not give us permission to use it for other things.”
Wang’s testimony goes to the heart of federal prosecutors’ case against Bankman-Fried. They accuse him of orchestrating a scheme to fraudulently transfer funds to Alameda, creating a massive shortfall that led to both companies’ bankruptcies.
Wang is one of the government’s three star witnesses, along with former Alameda chief executive officer Caroline Ellison, who is also Bankman-Fried’s former girlfriend, and former FTX engineering chief Nishad Singh. Prosecutors said on Friday that Ellison would testify next week.


The long friendship between Wang and Bankman-Fried, who first met at a high school maths camp and were roommates at the Massachusetts Institute of Technology, is an additional, though largely unspoken, dimension to the former’s testimony.
On both Thursday and Friday, Wang avoided making eye contact with Bankman-Fried as he walked through the courtroom towards the witness stand.

Former crypto mogul Sam Bankman-Fried (left) allegedly implemented a multibillion-dollar scheme that made the exchange’s collapse inevitable. PHOTO: NYTIMES
Under questioning on Friday by Assistant US Attorney Nicolas Roos, Wang testified about the secret mechanisms that permitted funds to flow from FTX to Alameda.
Wang said Bankman-Fried asked that a backend “allow negative” balance feature be added for Alameda. Wang said most users were only able to draw from amounts they had deposited.
Some big customers were given lines of credit at FTX, Wang said. But no one besides Alameda had a credit line of more than US$1 billion, and most were much smaller, in the millions of dollars, according to Wang. Alameda’s was US$65 billion, he said.
Bankman-Fried also directed that Alameda be exempted from liquidation rules that applied to other FTX accounts, Wang said.
He explained that accounts that were in danger of going into the red had their positions sold off to a market maker before that could happen. Wang said the feature existed to protect the exchange and other customers.

Better books​

But Bankman-Fried did not want this protection to apply to Alameda, Wang said, and he also occasionally used that special privilege to clean up FTX’s books.
Wang described one instance in which Bankman-Fried asked for Alameda to take a loss of hundreds of millions of dollars instead of the exchange’s backstop insurance fund, which did not have sufficient funds.
According to Wang, it was better for Alameda to take such losses because its books were less public than FTX’s.
On cross-examination, Bankman-Fried lawyer Christian Everdell tried to suggest that the special privileges Alameda enjoyed on FTX were tied, at least in part, to its role as a market maker and as a large customer of the exchange.
The defence will continue its questioning of Wang on Tuesday.
MORE ON THIS TOPIC
FTX goes bankrupt: Sam Bankman-Fried fooled the crypto world and maybe even himself
FTX 2.0: Bankman-Fried’s former crypto exchange outlines plan for potential reboot
Wang’s description of special treatment for Alameda flies in the face of FTX’s public stance that the exchange treated customers equally, prosecutors allege.
On Thursday, Mr Matt Huang of crypto venture capital firm Paradigm, an investor in FTX, testified that his firm was aware of the relation between Alameda and the exchange but was reassured that there was no preferential treatment.
Mr Huang said it would have been “a concern” if he had known Alameda was not subject to liquidation rules.
“It would’ve meant Alameda could trade with leverage on the platform and could incur negative balances that would need to be repaid somehow,” Mr Huang said, adding, “Given crypto prices are volatile, the business could be insolvent. It would also be damaging to the brand and customers’ trust.”

Mr Matt Huang of Paradigm, an investor in FTX, testified that his firm was aware of the relation between Alameda and the exchange but was reassured that there was no preferential treatment. PHOTO: AFP

Shutting down Alameda​

On Friday, Mr Roos showed jurors a July 2019 tweet in which Bankman-Fried said Alameda was a liquidity provider on FTX and that its account was just like everyone else’s. The prosecutor noted that it was the same day that Alameda was given its “allow-negative” privilege.
Mr Adam Yedidia, another MIT classmate who joined FTX, testified on Wednesday that he discovered the scale of Alameda’s borrowing and confronted Bankman-Fried in June 2022.
“It concerned me,” Mr Yedidia said. “It seemed like a lot of money for Alameda to be owing FTX. And I wanted to be certain that Alameda could repay that debt.”

Mr Adam Yedidia testified on Wednesday that he discovered the scale of Alameda’s borrowing and confronted Bankman-Fried in June 2022. PHOTO: AFP
But it was not the massive liability but the prospect of a Bloomberg News article on the possible conflicts of interest in Alameda’s relationship with FTX that spurred Bankman-Fried to consider taking action, Wang testified.
Bankman-Fried organised a September 2022 Signal chat that also included Ellison and Singh in which he suggested shutting down Alameda, Wang testified. But Bankman-Fried backed off the idea when he realised that Alameda could not repay the US$14 billion it owed FTX.
Two months later, shortly after FTX’s bankruptcy filing, Wang said Bankman-Fried asked him again to figure out a way to move funds, this time to put them out of reach of the US proceeding.
Company lawyer Ryne Miller had told them no assets could be transferred, but Bankman-Fried said to ignore him, Wang testified.
Wang said he went to prosecutors on Nov 17 and told them he wanted to cooperate. BLOOMBERG

 

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Gemini, DCG sued by New York for alleged $1.5 billion crypto fraud​

The lawsuit accuses Gemini and DCG’s Genesis Global Capital unit of failing to disclose to investors the risks of a crypto lending programme they started in 2021. PHOTO: REUTERS

Oct 20, 2023

NEW YORK – Gemini Trust and Digital Currency Group (DCG) are being sued by New York’s top law-enforcement officer for allegedly defrauding customers of US$1.1 billion (S$1.5 billion), escalating legal woes for two companies hit hard by 2022’s plunge in cryptocurrency markets.
DGC is backed by investors including Singapore sovereign wealth fund GIC.
The lawsuit filed on Thursday by New York Attorney-General Letitia James accuses Gemini, which operated a crypto exchange, and DCG’s Genesis Global Capital unit of failing to disclose to investors the risks of a crypto lending programme they started in 2021. The venture’s assets collapsed in 2022 amid several high-flying bankruptcies, including Sam Bankman-Fried’s FTX.
Ms James said that some investors lost their life savings.
The state said it wants to ban Gemini, Genesis and DCG from the financial investment industry in New York. Ms James is also seeking restitution for investors and disgorgement of the companies’ allegedly ill-gotten gains.
Gemini, founded by brothers Tyler and Cameron Winklevoss, lied to customers about how risky loans were in its venture with Genesis and failed to disclose that at one point, almost 60 per cent of its third-party loans were to Bankman-Fried’s crypto trading firm Alameda Research, the state claims. Genesis and DCG were accused in the suit of trying to conceal spiralling losses.
The claims by New York come after the United States Securities and Exchange Commission in January sued Genesis and Gemini over their failed crypto-lender joint venture, known as Gemini Earn.

Meanwhile, the three firms have also engaged in suing each other in the wake of sector woes. Genesis, which filed for bankruptcy in January, later sued its parent DCG, seeking to recover about US$620 million in outstanding loans. Gemini has also sued DCG, as well as DGC chief executive Barry Silbert, seeking to recover “damages and losses” from alleged “fraud and deception” related to Gemini Earn.
The alleged fraud by the companies is “yet another example of bad actors causing harm throughout the under-regulated cryptocurrency industry”, Ms James said in a statement.
“My office will continue its efforts to stop deceptive cryptocurrency companies, and to push for stronger regulations to protect all investors,” said the Attorney-General, who has sought to position herself as a leading crypto enforcer.

DCG, in a statement, said it has always conducted business “lawfully and with integrity”, and that the company will fight the state’s allegations.
“We have actively cooperated for months with the Attorney-General’s investigation in an open and transparent manner,” DCG said. “We were blindsided by the filing of the complaint, and there is no evidence of any wrongdoing by DCG, Barry Silbert, or its employees.”
Gemini, in a statement posted on X, formerly known as Twitter, applauded the complaint against Genesis and DCG, but said that it wholly disagrees with the Attorney-General’s decision to also sue Gemini.
“Blaming a victim for being defrauded and lied to makes no sense and we look forward to defending ourselves against this inconsistent position,” said Gemini.
Gemini Earn purported to generate as much as 8 per cent interest for Gemini customers by allowing Genesis to lend their crypto assets to third parties. But more than US$1 billion was invested in Three Arrows Capital, a hedge fund that failed in mid-2022, leaving a hole in Genesis’ balance sheet, according to the lawsuit. Around the same time, Genesis lost more than US$100 million from another borrower, Babel Finance, Ms James said.
Genesis is accused in the suit of failing to adequately audit Three Arrows and lying to Gemini when it claimed “to regularly review its borrowers’ financial statements”, Ms James said.
The state’s probe found that no such audit had been performed for more than two years, she said.
In July 2022, Gemini’s board of managers considered ending the Gemini Earn programme due to the Genesis risks, with one board member comparing the company’s financial condition to Lehman Brothers, Ms James said in her statement.
But Gemini “failed to provide its investors with any meaningful warnings about these risks”, she said.
The complaint noted that “Gemini’s chief operations officer, who also sat on Gemini’s Enterprise Risk Management Committee, withdrew his entire remaining Earn investment – totalling more than US$100,000 – on June 16 and June 17, 2022”. The filing did not name the executive. Mr Noah Perlman was Gemini’s chief operating officer from August 2020 till January 2023, according to his LinkedIn profile. He then joined Binance, the world’s biggest crypto exchange, as its chief compliance officer.
Other Gemini risk management personnel withdrew their own investments from Earn between June and September as well, according to the complaint.
During a meeting on Oct 20, 2022, Mr Silbert informed Mr Cameron Winklevoss “that Genesis Capital could not redeem Earn investors’ funds without Genesis Capital declaring bankruptcy”, the complaint said. “Gemini secretly granted Genesis Capital multiple extensions to return investor funds.”
Mr Silbert and former Genesis CEO Michael Moro, both of whom are named as defendants in the suit, are accused of repeatedly lying to investors, as well as to Gemini, about the financial woes. Genesis allegedly hid from Gemini the existence of a US$1 billion promissory note that was created to conceal the extent of its losses, according to the complaint. BLOOMBERG

 

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Bankrupt Genesis sues parent DCG over unpaid loans of more than $832 million​

Digital Currency Group was sued on Wednesday by its bankrupt Genesis Global Capital cryptocurrency lending unit. PHOTO: REUTERS

SEP 7, 2023

NEW YORK - Digital Currency Group (DCG) was sued on Wednesday by its bankrupt Genesis Global Capital cryptocurrency lending unit, as both sides negotiate DCG’s repayment on more than US$610 million (S$832 million) of loans that matured in May.
In a complaint filed in Manhattan bankruptcy court, Genesis is seeking to recoup US$500 million that DCG borrowed under four loans.
It also filed a separate complaint to recover 4,550 bitcoin, worth about US$117 million, owed by the affiliated Digital Currency Group International under a fifth loan.
Genesis said recovering the unpaid sums would offer a “significant benefit” to its bankruptcy estate, but that DCG is “wrongfully in possession”.
In footnotes, Genesis said it is in talks for “partial repayment” by DCG, and intends to stop pursuing the lawsuits if both sides settle.
According to court papers, DCG owes more than US$1.7 billion to Genesis and other debtors.
Genesis filed for Chapter 11 protection from creditors in January, two months after halting withdrawals. DCG, which also owns crypto news website CoinDesk and digital asset manager Grayscale, has not sought bankruptcy protection.

DCG raised US$700 million in November 2021 from prominent investors such as Singapore’s GIC, SoftBank, Ribbit Capital and Alphabet’s CapitalG.
Last Tuesday, Genesis said it reached an agreement in principle with DCG and unsecured creditors, where to satisfy those obligations DCG would pay US$275 million, and take out US$1.16 billion of new credit facilities maturing in two or seven years.
In a statement on Wednesday, DCG said it expects to file a settlement with the bankruptcy court soon.
“At that point, we will initiate the distribution of funds and continue on the path to significant recovery for Genesis creditors,” it said.
Genesis also made large loans to the hedge funds Three Arrows Capital and Alameda Research, which both filed for bankruptcy in 2022.
Alameda’s parent, cryptocurrency exchange FTX, also filed for Chapter 11. US prosecutors have accused FTX’s founder Sam Bankman-Fried of orchestrating a multibillion-dollar fraud. REUTERS

 

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MAS bars DBS from new business acquisitions, non-essential IT changes for 6 months after disruptions​

DBS will also not be allowed to reduce the number of its branches and ATMs. ST PHOTO: GIN TAY

Aqil Hamzah

Nov 1, 2023

SINGAPORE – For six months, DBS Bank will have to suspend non-essential changes to its IT systems, and will not be allowed to take on new business ventures, the Monetary Authority of Singapore (MAS) said on Wednesday.
MAS said it directed DBS to suspend all changes to its IT systems, except for those related to security, regulatory compliance and risk management.
“This is to ensure that the bank dedicates the needed resources and attention to strengthen its technology risk management systems and controls,” it said. DBS will also not be allowed to reduce the number of its branches and ATMs.
The pause imposed by the regulatory body on the Republic’s largest bank comes after a series of disruptions to its services throughout the year.
The bank experienced major disruptions to its banking services on March 29, May 5, Sept 26, as well as Oct 14 and 20. The Oct 14 outage lasted 12 hours, affecting the bank’s digital services and automated teller machines (ATMs).
During this six-month period, the authority will not approve any new business acquisitions made by the bank either.
MAS said the move to disallow DBS from reducing the number of its branches and ATMs would ensure that there are enough alternatives for the bank’s customers if there are new disruptions. This directive will remain in place until MAS is satisfied with DBS’ progress in enhancing its operational resilience, the authority added.

MAS will review DBS’ progress at the end of six months, and may extend the duration of these measures, vary the additional capital requirement currently imposed, or take further action.
DBS currently has an additional capital requirement of about $1.6 billion, which MAS imposed in May. This followed a disruption to the bank’s digital banking and ATM services on May 5, which was preceded by a widespread disruption on March 29.
It also had to apply a multiplier of 1.8 times to its risk-weighted assets for operational risk. This was marked up from the 1.5 times multiplier applied in 2022, after it suffered its worst outage in more than a decade in November 2021.

MAS added that it will take up to 24 months for DBS to execute the planned changes to improve the resilience of its digital banking services.
“In the meantime, it is possible that disruptions may still occur. In such situations, MAS expects DBS Bank to promptly recover its services and communicate to its customers in a clear and timely manner,” MAS said.
Ms Ho Hern Shin, deputy managing director of financial supervision at MAS, said: “DBS must put in place immediate measures to ensure service reliability while it continues to invest in the longer-term efforts to bolster its operational resilience.
“We have imposed this six-month pause on the bank to give it the space to take the actions needed to maintain customer trust.”

In a press statement, DBS chairman Peter Seah apologised for the digital banking disruptions.
“With the incidents of the past year, we have failed to live up to these expectations, and have also fallen short of our own standards. As an acknowledgement that the bank could have done better, senior management will be held accountable, and this will be reflected in their compensation,” he said.
He added that, in the past few months, DBS has been trying to strengthen its resiliency and business continuity, and to be able to recover more quickly when incidents happen.
“This is a work in progress, and we seek customers’ patience as we work through our remedial actions,” Mr Seah said.

 

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MAS penalties on DBS won’t set the bank back, analysts say​

FILE PHOTO: A DBS logo on their office building in Singapore, February 22, 2016. REUTERS/Edgar Su

Abigail Ng​

03 Nov 2023


SINGAPORE: The punishment meted out to DBS appears "minor" and not commensurate with the impact of the service disruptions to Singapore's biggest lender, including one where online banking and ATM services were down for hours, analysts said.
On Wednesday (Nov 1), the Monetary Authority of Singapore (MAS) said DBS would be barred from making non-essential IT changes and any acquisitions of new business ventures for six months.
DBS also will not be allowed to reduce the size of its branch and ATM networks until MAS is satisfied with the progress of the bank’s remediation plan.
And the financial regulator said it would continue to require DBS to apply a multiplier of 1.8 times to its risk-weighted assets for operational risk.
When asked if the penalties were reasonable, the National University of Singapore's Assistant Professor in Finance Ben Charoenwong said it was worth considering the impact that the disruptions had on customers.
DBS is the “go-to bank” for many Singaporeans – some of whom may not do business with any other institutions, he said.
“If they are unable to access their funds or process payments, the cost to those users is the foregone economic transactions,” he said. “From that perspective, it seems the (penalties) and additional capital requirements appear to be minor.”
In a research note published on Thursday, RHB Bank research analysts said the management team at DBS could give more details on the impact of MAS' regulatory action, when its third-quarter results are released.
“But the direct impact looks to involve higher opex (compliance cost, tech spending) and capex,” the analysts wrote, referring to operational expenditure and capital expenditure.
“In our view, the impact does not represent too much of a setback to DBS,” the analysts told CNA separately.

ACQUISITION PLANS?​

The ban on acquiring new business ventures in the next six months may also have a limited impact on DBS, with five analysts telling CNA they were unaware of any upcoming acquisition plans.
“We note that the group has been focusing on integrating LVB (Lakshmi Vilas Bank) and Citi Taiwan acquisitions as well as guiding for higher dividends,” said Mr Thilan Wickramasinghe, head of Singapore research at Maybank.
“To us, this indicates limited appetite for any material (mergers and acquisitions) in the near term,” he said.
DBS took over India’s Lakshmi Vilas Bank in late 2020 and completed its acquisition of Citi’s consumer banking business in Taiwan in August this year.
MAS will review the progress made by DBS after the six-month window, and may extend the duration of measures, vary the additional capital requirement or take further actions.

“NOT A BAD IDEA” TO NOT FINE DBS​

MAS did not impose any punitive monetary actions on DBS, noted Dr Patrick Thng, former chief information officer for finance and treasury at the World Bank.
“It’s not a bad idea in the sense that instead of fining DBS and taking the money, they asked DBS to use that money to fix their infrastructure problems,” he said.
“To some extent, I commend MAS, I think that’s quite commendable.”
DBS chief executive officer Piyush Gupta said the bank will set aside S$80 million (US$58.6 million) to enhance system resiliency.
Consulting firm Accenture conducted an independent review and found four main areas of weakness for DBS – technology risk governance and oversight, incident management, system resilience and change management.
To MAS, the board of directors and senior management play an important role in the oversight and management of technology risk, Dr Thng pointed out.
On that note, he said it was important for board members to have strong digital skills – beyond financial and business skills – to effectively steer the organisation.
“Many organisations, banks included, are not having enough people with digital experience on their boards,” he said, adding that it sometimes takes a disruption or outage to spur a company to find a board member with digital skills.

IMPACT ON DBS STOCK PRICE​

Shares of DBS fell 1.12 per cent on Thursday, the first trading day after the penalties were announced by MAS.
RHB Bank said it was possible that the decline was a reaction to the regulatory action, but pointed out that most banks' share prices slipped on the same day.
However, CGS-CIMB said DBS shares fell more than its peers on Thursday. UOB’s stock dipped 0.77 per cent, while OCBC fell 0.16 per cent.
Shares of DBS have fallen around 5 per cent so far this year, but analysts said it was not due to the service disruptions.
“(The year-to-date) share price movement is primarily driven by earnings and management’s outlook in relation to the interest rates, and less so by the outages, in our view,” CGS-CIMB said.
Mr Wickramasinghe of Maybank said material impact on earnings or dividends was unlikely in the near term. In the medium term, growth could be affected by how DBS addresses the root causes of the outages and how risk management and control functions are strengthened, he said.
“Five major digital disruptions in the space of a year does raise concerns on system reliability and risk management,” he said, adding that DBS Group’s growth and product distribution strategies were very digital-centric.
“More clarity will be needed on how these can be executed under the current situation.”

 

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Singtel shares sink as much as 5.2% amid Australian unit’s network outage​

Singtel will announce its financial results on Thursday for the half-year that ended on Sept 30. PHOTO: ST FILE

Sue-Ann Tan
Business Correspondent

NOV 8, 2023

SINGAPORE – Singtel shares fell on Wednesday after a nationwide network outage that lasted almost 14 hours hit its Australian unit Optus.
The stock fell by as much as 5.2 per cent to hit a low of $2.35 at 10am, down 13 cents from Tuesday’s close of $2.48.
The counter then climbed back to close at $2.36, down 4.84 per cent, after a day of heavy trading, with more than 62 million shares changing hands, making it the second most heavily traded stock on Wednesday.
Investors took flight after the Optus outage that affected around 10 million Australian customers, around 40 per cent of the country’s population. It is Australia’s second-largest telecoms provider.
The outage was first reported around 4am Australian time and followed a devastating cyber attack in 2022.
The attack exposed the details of millions of customers, including their home addresses and passport numbers.
In response to media queries on the outage, a Singtel spokesman said: “This is a very unfortunate incident that we take very seriously.”

The company acknowledged that it is “”extremely disruptive” to have mobile and broadband services down.
“Since the start of the outage, Optus’ engineers worked non-stop to restore services progressively. Optus is conducting further investigations into the technical network fault to ascertain the root cause of the event to prevent any recurrence,” said its spokesman.
“We know how important connectivity is to our customers, and network resilience and investment remain a top priority in all the markets we operate in.”
Singtel will announce its financial results on Thursday for the half-year that ended on Sept 30.
It had reported in August that first-quarter net profit dropped 23.1 per cent from the same period a year earlier.
This was mainly attributed to its associate Bharti Airtel, which recorded foreign exchange losses as the Nigerian naira fell against the US dollar.

 

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Temasek-backed Carsome cutting hundreds of jobs to reach profit​

Carsome Group is eliminating positions across South-east Asia, with Indonesia and Thailand the hardest hit. PHOTO: CARSOME MALAYSIA/FACEBOOK

NOV 16, 2023

Carsome Group, which operates a South-east Asian used-car online marketplace, is cutting hundreds of jobs to reduce costs as it works to reach profitability ahead of a potential stock-market listing.
The company is eliminating positions across South-east Asia, with Indonesia and Thailand the hardest hit, people familiar with the matter said. Carsome has scaled down its operations significantly in those two markets, which it entered in 2017, the people said, asking not to be identified as the plans aren’t public. It has about 4,000 employees.
Malaysia’s most valuable technology start-up last year delayed its dual listing plans in Singapore and the US on concerns that deteriorating macroeconomic conditions could dent its valuation. The company expects to break even this year and is set to achieve its first full year of profitability in 2024, chief executive officer Eric Cheng said in July. Carsome is preparing to be ready for an initial public offering, and when there is a window, the company can list quickly, he said at the time.
Carsome “makes adjustments to its workforce where necessary,” the company said in an emailed response to questions, declining to comment on specific numbers. “We remain committed to investing in all of our current markets and plan to accelerate profitable growth in 2024,” it said.
Higher interest rates combined with slowing economic growth and geopolitical tensions have hurt market sentiment and weighed on first-time share sales. Carsome raised US$290 million (S$391.5 million) early last year at a valuation of US$1.7 billion in a series E round led by the Qatar Investment Authority as well as 65 Equity Partners and Seatown Private Capital Master Fund, both of which are backed by Singapore’s Temasek Holdings.
Founded in 2015, Carsome has expanded into Indonesia, Thailand and Singapore. The company works with more than 13,000 dealers and sold more than 150,000 cars last year, according to its website. BLOOMBERG