November 21, 2025 • 28 mins
Katie and Matt discuss Batman, Labubu binary options, sneaker manipulation, publicly traded private credit, OBDC, OBDC II, private credit marks, Frank's email list, indemnification and cellulite butter.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. I got a haircut.
Speaker 2 (00:11):
That was actually that's the first thing I said to you, though,
after I told you that, I didn't want you to
watch me yogurt.
Speaker 1 (00:17):
But in other news, you got a neck tattoo.
Speaker 2 (00:22):
Yeah, I got a neck tattoo last Friday.
Speaker 1 (00:25):
It's a Batman.
Speaker 2 (00:27):
Yeah, it's the bat signal, the bat signal. Yeah, it's
a bat tat on my neck. It's my first tattoo.
A little intense to get it on the neck.
Speaker 1 (00:35):
You can't realize this tattoo, like having only one tattoo
and having apian neck tattoo is pretty good.
Speaker 2 (00:39):
The tattoo artist asked me that as well. The thing is,
I got the tattoo for my late pony Batman. I'd
had him since I was eleven. He passed away in May,
the day before my birthday. Also intense. I knew I
was going to get this tattoo when he did leave us.
So my answer to that question is when my cat
does get another tattoo. I wasn't expecting my TV producers
(01:04):
to be as into it as they were. We have
this thing called the.
Speaker 3 (01:09):
Tattoo is news, I know, but I thought.
Speaker 2 (01:11):
That, you know, we are a buttoned up financial news network.
I thought that they wouldn't be thrilled about it, but
they really wanted to do an on air reveal, so
we did. We had a man with a steady cam,
which is just a handheld camera essentially, come in and
zoom in on it at one point during one day show. Thankfully,
it wasn't scabbing yet, so it still looked kind of good.
(01:31):
It's in like a little yeah. Yeah, I think it's
healing nicely. It was really painful. Are you going to
get a tattoo?
Speaker 3 (01:42):
No? No, no, I've missed.
Speaker 2 (01:45):
I don't think you've had.
Speaker 1 (01:46):
Had a tattoott man.
Speaker 2 (01:48):
I was kind of thinking about that that my first
tattoo was at thirty two years old. It's still I
don't know.
Speaker 3 (01:54):
I feel like age, I'm too old for tattoo.
Speaker 2 (01:56):
But I feel like if you want a tattoo, you
probably get it in your teens twenties.
Speaker 1 (02:00):
No, I feel like a lot of people enter a
new phase of life from their thirties and become tattoo people.
Speaker 2 (02:05):
Yeah.
Speaker 3 (02:05):
Maybe yes.
Speaker 1 (02:07):
I saw it on Instagram on Friday and I said
to my wife, Oh, Katie got a neck tattoo, and
I was like, what, I'm like, Katy is not just
a financial news anchor, She's also an emo girl. Yeah.
Speaker 2 (02:18):
At heart, I'm just trying to get back to my roots.
You know.
Speaker 1 (02:23):
Hello, and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levine and I write the Money Stuff column
for Bloomberg Opinion.
Speaker 2 (02:34):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 3 (02:49):
Do you know what a lu booo is?
Speaker 2 (02:50):
I do? Are there impossible to escape? Did you know
what a little boo boo was? Prior to this week?
Speaker 1 (02:57):
I'm definitely aware of the booboos as an important cultural force.
Speaker 2 (03:02):
Yeah, do I.
Speaker 1 (03:03):
Know what they are? Even now? I couldn't pick them
out of a lineup.
Speaker 2 (03:07):
I really hate them. Sure, there's a print out of
a little Boo Boo between us on the table right now.
Speaker 3 (03:13):
And I like free creatures that they're freaky.
Speaker 2 (03:16):
They're freaky little things. Now you can trade derivatives of them.
Speaker 3 (03:20):
Kind of them?
Speaker 1 (03:21):
Yes, absolutely, yeah, you can trade binary options on the
boo boos. It's so good.
Speaker 3 (03:25):
Yeah, through enthusiasm.
Speaker 2 (03:29):
I really I don't get it. This is one of
the first cultural phenomenons where I just I feel like
I can't get into the headspace to pay sure.
Speaker 1 (03:38):
Yeah, this is like the four hundredth for me.
Speaker 2 (03:41):
Really, yeah, that's true. See I'm still getting neck tattoos.
This is my limit though, so Calshi and stock x
our partner, so that there's going to be event contracts
tied to many things.
Speaker 1 (03:58):
Ye, here's the Boo Boo's a third category of h
and also some trading cards. Trading cards.
Speaker 2 (04:07):
Yes, I don't understand this because I have my mind
dropped around what stock x does. And you know, there's
other alternative asset market places where you know, you can
buy shares of collectible items. I don't know how you
turn that into an events contract, right, this.
Speaker 1 (04:23):
Is what I've been writing about. It's a weird mechanism.
Speaker 2 (04:26):
Yeah.
Speaker 1 (04:27):
What you can do is you can buy a yes
no contract that pays off a dollar if, like, you know,
the price of some box of the Boo Boos is
over one hundred and twenty dollars and it pays off
zero dollars if the price of that box of the
booos is less than one hundred you know, like you
can turn any continuous variable into a binary. Right. You
can say, if the price of Tesla is above four
(04:48):
hundred dollars, then you get a dollar, and if it's
below four hundred dollars, you don't get a dollar.
Speaker 2 (04:51):
Right.
Speaker 1 (04:52):
But it's not the most natural no product.
Speaker 2 (04:55):
It seems not fun, but that's.
Speaker 1 (04:56):
It's lot fun. But I don't know, it's like kind
of interesting, right. I don't know the reason for this,
but I speculated on some reasons, the simplest of which is, like,
CALSHI is an event contract marketplace, right. I think that's
what it does. It lets your bet on whether or
not some event will happen. And if that's your lens,
then like you could turn anything in the world into
a yes no event, Right, And if you get money
(05:20):
for trading, then you want to turn everything in the
world into a yes no event. And so you sort
of look around and say what products can we trade?
And it's like, well sneakers, I was like, well sneakers
are not really yes no events, but if you have to,
you can make them into yes no events and you
can trade them.
Speaker 2 (05:36):
You know, convolute the question in such a way that it
becomes and it's not like.
Speaker 1 (05:41):
A crazy convolution, but it's like a little crazy it is. Yeah,
it's a little crazy. Like I was looking at their charts,
you know, and like they have like prices some sneaker
and like there's a chart and the chart is like
four different lines for the probabilities of different like price levels,
because you want the chart to be just like the price. Right,
there's an intuitive chart of a sneaker price, and they
don't show that into ay, so it's a strange mechanism.
(06:03):
Maybe this is just like a publicity stunt, but I've
enjoyed writing about it because like one thing that is
going on here is that there is a belief, possibly
a money motivated belief among people like who are in
prediction markets and who work at like big exchanges and
who are partnering with prediction markets that this is like
the path to be in everything exchange, which is like
(06:24):
the term that coinbase has used, like this is the
way that you can sort of suck everything in the
world into financial markets. And one point I've been making
this wee because it's like kind of a rickety way.
Why does it have to be a prediction market like this?
But it is something that people are pretty enthusiastic about,
because at the end of the day, if you're running
a financial market, like one big category of what you're
(06:45):
doing is offering people more opportunities to bet, let's say,
on more things. And this is the most general purpose
way that people have found to let people bet on things.
Speaker 2 (06:54):
Yeah. I get the betting argument. People like to bet, and.
Speaker 1 (06:57):
I don't know why they would run a bet on
like the yesterday.
Speaker 2 (07:00):
That's the thing. It has to be fun, right, and
it doesn't seem as fun versus like I'm going to
buy shares of a meme stock and hope it goes
to the moon versus I'm going to hope the price
of the box of the La Boo Boos goes above
this certain threshold.
Speaker 1 (07:13):
Yeah. I do wonder if this is like a baby
step on the way to some more moonworthy financial market.
Speaker 2 (07:20):
Yeah.
Speaker 1 (07:21):
One thing I've written is that the essential thing here
is that these are contracts with someone on either side
of them, right, Like you're betting against someone else, and
if you have a contract that can go to a
million dollars, then the person on the either side of
that has to put up collateral and could have to
put up a million dollars of collateral. Right, so you
have like a really complicated and risky margining system if
(07:41):
you're having bets that can go continuously as far as
you want in either direction. Yeah, Whereas like traditional prediction markets,
the bets are like you get a dollar or you
don't get a dollar. So the collateral and the margining
is a lot easier and the risk is a lot lower.
So these are like not super risky exchanges. The exchange
itself not a particular riskue proposition as compared to oh, say,
(08:02):
certain crypto exchanges we've talked about. And so going from
that system to a system where the price can be
whatever the price is is like a you know, risky
and complicated set of decisions, but possibly something that is
in the future if you want to be at everything exchange.
Speaker 2 (08:16):
Yeah, I do wonder how this can be manipulated this, right,
I mean events, contracts on.
Speaker 1 (08:24):
You know. The answer I think is very clearly that
it can't be because go on, who is trading this.
The way to the way to manipulate this is like
there's a contract on like the average price of some sneaker,
and I go and buy a bunch of the sneaker
to push out the average price, right, and then I
win on my prediction market contract. But I assume that
(08:46):
however big the market for the sneaker is, it's probably
not that big like treasury bounds. However the market for
the sneaker is, presumably the prediction market is like orders
of magnitude smaller, because like, some people buy sneakers because
they want to wear the sneakers weird, But like, how
many people are going to want to buy the contract
that's like, oh, for the sneaker, price will be about
(09:07):
one hundred and twenty dollars. So I think that it's
going to be very hard to manipulate because it is,
at this point, two days in or whatever, a very
small derivative on top of a yeah, moderately larger market.
But in the long run, sure, Like you know, you
have an event contract that is a binary, right, it
pays zero or one, and it's on some underlying thing.
(09:30):
And the event contract gets big enough and it's like
trading a penny below the threshold, You'll buy some of
the underlying thing to push it up about the threshold,
and you make a lot of money on the contract.
It's like very easy to manipulate in concept. It's probably
very hard to manipulate right now in reality, but like,
you know, give it time, get more things.
Speaker 2 (09:47):
I get it sea legs first.
Speaker 1 (09:49):
And the other thing is, you know, I think about
this all the time. Like the CFTC, the US Commodity's
Futures Trading Commission, regulates commodities futures. It doesn't like really
regulate the market for wheat, you know, but it does regulate, like,
you can't manipulate the wheat market if it's going to
affect commodity futures. So the CFTC has some like anti
manipulation powers. And if you put everything onto prediction markets,
(10:12):
then everything becomes a commodity. And like the CFTC has
to think about like were you buying those sneakers to
push out the price of sneaker futures?
Speaker 2 (10:20):
And then it's like, yeah, it's going to be interesting
to see how just the prediction market space matures, because
this I think is firmly silly season and I think
we can put it in that bucket.
Speaker 1 (10:33):
Yeah. I think there are two paths for it maturing.
Speaker 2 (10:35):
Yeah.
Speaker 1 (10:36):
One is like what everyone says, which is like it's
somehow like becomes a market for everything, and it's like
becomes like the way that companies and like real people
think about having risk and like predicting the future and
like understanding probabilities and potentialities to the future. And then
the other way is it's like a giant legalized sports book, right, yeah,
and that's kind of where my money is. But who knows,
(10:56):
who knows?
Speaker 2 (10:57):
Well, I was speaking to the CEO of CBO sure
last week.
Speaker 1 (11:00):
Probably not in the legal live sports book.
Speaker 2 (11:04):
No, no, So Cibo doesn't have their own prediction markets
outfit yet, but they're going to roll something twenty five minutes. Well,
they're going to roll it out in the next few months,
which is interesting because there's kind of a land grab
going on right now. I have to imagine that the
exchanges think about this all the time. They should've been.
Speaker 1 (11:22):
During commodity futures for years, and now it's like it
turns out they were running a sports book and they
didn't know it.
Speaker 2 (11:28):
Right. No sports, Cibo specifically is not going into sports
at least, that's that's what the CEO said mid November
twenty five. So we have the receipts and like that.
Speaker 1 (11:41):
Makes sense because like if you're like Calshier polymarket and
you're like a little hobbyist prediction site. And then like
sports is it's like enormous gusher of money. And then you
go into sports right if you're seabow, like you know,
if you have like treasury, Yeah, like you know, there's
like more money in sports books than there is is
in like traditional prediction markets. There's more money in real
(12:02):
financial markets than there's in sports books.
Speaker 2 (12:04):
Yeah, exactly. So they're focusing on economic and financial prediction
markets for the next forty five minutes.
Speaker 1 (12:14):
Synergies there with interest rates and whatnot.
Speaker 2 (12:16):
Yeah, for sure. Booze from La Boo boos to owls,
(12:37):
owls the blue cones. One interesting week.
Speaker 1 (12:41):
We've said of this before, but like you yes, your
first love besides your horse is ETFs. You love an ETF.
So we've talked about private credit. We've talked a lot
about retel private credit and like ETFs for private credit,
which is like a category that kind of sort of.
Speaker 3 (12:58):
Exists, trying to make it make trying to make it thing.
Speaker 1 (13:00):
And whenever we talk about that, I always say, there
is a retail exchange traded fund category for private credit,
and it is called a BDC or business development company,
which is a terrible name because it makes it sound
like it's a business development company, and that is not
what it is. I don't know what a business development
company would be, but it sounds like a company that
develops businesses, right, But in fact, a BDC is just
(13:22):
a private credit fund. It's just a pot into which
a manager like Blue Owl puts private credit investments.
Speaker 2 (13:30):
And it's publicly traded.
Speaker 1 (13:31):
It's totally traded, and so investors can buy shares a
traded BDC. Not all some are like private like not traded, yes,
but like a listed BDC is just a stock on
the stock market. You can buy shares. Anyone can buy shares.
You can sell shares in the market. It's a little
bit like you need tof with one really important distinction.
Speaker 2 (13:51):
Go on.
Speaker 1 (13:51):
You can't redeem like you can sell your shares in
the market. And so what that means is that the
price of the shares is the price of the shares.
There's no mechanism to make sure that the price of
the shares is in line with NAV, whereas like an ETF,
like you know, if like the shares are trading below NAV,
then like you buy some shares and you pop them
out of you know, pop the assets out of the fund,
and you get stuff at a Navy.
Speaker 2 (14:12):
In authorized participant.
Speaker 3 (14:15):
Whatever.
Speaker 1 (14:15):
With BDC's that's not necessarily the case, and it's therefore
not actually the case for whatever reason.
Speaker 2 (14:24):
And I feel like we got another lesson in that
this week with Blue Owl having to call off the
merger between one of its publicly listed BDCs and then
a private fund.
Speaker 3 (14:36):
Yeah.
Speaker 1 (14:36):
So it has a thing called OBDC, which is like
the Blue Al Business Development Company, which is a publicly
traded PDC, and it has a thing called OBDC two,
which is a private BDC. So private BDC is like
they sell it to you know, investors. It doesn't trade
on the market. And so if you're an investor in
(14:56):
OBDC two, the private one, you can't get your money
back by just selling on the stock market. And so
the way it works is that they have a redemption
mechanism where like every quarter they'll buy up to a
certain amount of the shares back if you want to, right,
so they'll offer to buy shares back and you can
tender or not. And in recent months there's been a
little tension. Yes, they have bought back anyone's shares who's
(15:19):
wanted to sell. But there's like been a little bit
more redemptions than they'd like, and there's like, you know,
a widespread sense that if it continued at that pace,
they would eventually get redemptions speak, which they're allowed to do, right, Like,
they can sort of buy back as much as they want.
And so to get out ahead of that, they announced
that they were going to merge these two funds. So
(15:40):
if you had shares of ABC two, the private company,
you'd get shares of OBDC, the public company, and then
you could sell those whenever you wanted, no problem, you
don't have to redeem anymore. And that caused some unhappiness
because OBDC won the publicly traded one happens to traded
a about a twenty percent discount and net asset value,
(16:03):
and so instead of being able to get back one
hundred cents on the dollar, you can get back eighty
cents on the dollar if you sell your public shares.
No one wanted that, Yeah, so they ultimately called off
the merger.
Speaker 2 (16:11):
Yeah. Specifically, when it comes to redemptions. In the third quarter,
they approved about sixty million dollars worth that was already
exceeding their pre set limit. Here the discount they've been
trying to address that, they've been doing, you know, a
bunch of share repurchases. They have a two hundred million
dollar program. But I could see how that would cause
some indigestion. Yeah, yeah, right, yeah, So now they're evaluating
(16:37):
how to go forward.
Speaker 1 (16:37):
Yeah, it's hard because like the publicly traded product seems
kind of like a better product for the manager and
getting people out of the private product into the public product.
The public product, for the manager's perspective is permanent capital, right,
Like they never have to redeem any of it. Yeah,
they can if they want to, and they have been right,
(16:58):
they've been doing buybacks, which you can think of a
buyback as like a way to address the discount and
make shareholders happy, or you can think of it as
like just an opportunistic trade where like they can buy
one hundred cents worth of stuff at eighty cents on
the dollar. Right. But with the private company, it's like
people complaining when they don't get liquidity. You have asking
(17:19):
for liquidity, so you have to pay up money when
you don't necessarily want to. It's a less good product,
but it is hard. To get people out when the
public product trades at a discount. Yeah, The other question
that one might ask is why does the public product
trade at a discount? And some of the answer for
that is, like everything trades at a discount, like clothes
(17:40):
on funds trading at a discount, and like the traditional
reason for that is, like you capitalize future fees in
the discount, and so like you know, yeah, you'd rather
own one hundred cents worth of loans than one hundred
cents of worth of loans plus like the fees you
have to pay Blue Howel for the rest of time,
but in November of twenty twenty five. The other reason
that there might be a discount is that there are
(18:01):
some people who believe you may not believe this, for
some people who believe that some private credit loans aren't
worth as much as private credit managers think they're.
Speaker 2 (18:10):
Yeah, that seems to be a more and more pervasive view.
Speaker 1 (18:13):
It's a you you Jamie Diamond said some word about cockroaches, et.
Speaker 3 (18:17):
Cetera, et cetera, and so Jeffrey Gunlock.
Speaker 1 (18:20):
Everyone not everyone. I shouldn't say that. Mark Lipschels, Yeah,
this is not like necessarily correct, but it is a
you that people have. And so one reason that a
publicly traded pot of private credit loans might trade at
eighty cents on the dollar is that some of the
people trading it don't really believe that the pot of
loans is worth the dollar. Yeah, and so if that's
the case, then, like one, this merger is awkward. But too,
(18:43):
the awkwardness around this merger calls awkward attention to people's
worries about valuation.
Speaker 2 (18:48):
Yeah, I mean you can also see this just in
shares of blue Owl Proper, which are down like forty
something percent this year. They're at their lowest since twenty
twenty three. A lot of that decline happened before we
got into any drama with the fund merger.
Speaker 1 (19:02):
Yeah, it's like a little you know, blue Owl as
a management company, Right, you don't get a pure sense
of like the valuation of the portfolio, but.
Speaker 2 (19:11):
People viewed as approximy I understand.
Speaker 1 (19:13):
Right, the price of blue Owl shares tells you something
about what people think about the future cash flows of
the private credit business. The price of OBDC shares tells
you what people think about what the current loans are
currently worth. Right, And like there's slightly different.
Speaker 2 (19:30):
Questions, slightly different. Right.
Speaker 1 (19:33):
The price of the Blue Owl shares going down suggests
that people think that the private credit party is over
coming to an end, not as good as it used
to be. That right, Yeah, the price of the business
developed company is possibly suggests cockroaches.
Speaker 2 (19:47):
Yeah.
Speaker 1 (19:48):
Possibly.
Speaker 2 (19:49):
Well, it's going to be interesting to see what happens here.
According to Bloomberg News, they have until April to find
a solution or will consider liquidating or dissolving the vehicle.
According to filings, typically there's you know, some wiggle room
around those deadlines.
Speaker 1 (20:03):
I will say pudating is like not a terrible outcome
for the childers because it's like, then you get one
hundred cents on the dollar.
Speaker 3 (20:08):
Yeah, assuming she's the loans one.
Speaker 2 (20:10):
Hundred and something better than eighty for sure.
Speaker 3 (20:13):
Yeah.
Speaker 1 (20:13):
Probably there's an incredible brain controversy. Let's say about Charlie.
Speaker 2 (20:35):
Javis another one.
Speaker 1 (20:37):
So, she was the founder and c of a company
called Frank that like helped students fill out financial informs basically,
and she sold it to JP Morgan for one hundred
and seventy million dollars. And the allegations are that she
sold it to them on the basis of like having
millions of devoted customers. And then it turned out that
(20:57):
all of the customer email addresses and her database were fake,
and they sent out, you know, like JP Morgan is
not really in the business of providing financialate advice, Like
JP Morgan bought Frank to get like access to this
like devoted young customer base, and then they sent out
an email to all of Frank's customers being like, hey,
sign up for JP Morgan credit card or whatever, and
like all the emails bounced in there like wait a minute,
(21:20):
and so they sued her for fraud and then ultimately
got referred to prosecutors and she was arrested in charged
with fraud and tried and convicted and sentenced to seven
years in person.
Speaker 2 (21:31):
And she's now I'm trying to find the title that
JP Morgan gave her because it was pretty good. But anyway,
go on.
Speaker 1 (21:36):
She was like, yeah, they bought Frank and she was
like made a managing director and head of Frank or whatever,
and it was.
Speaker 2 (21:43):
Like head of students something.
Speaker 1 (21:44):
Yeah, and then like they'd send out this email and
it all bounced and they're like wait a minute, and
they put her on leave and fired her and so forth.
But because she was a Japy Morgan employee and because
she had a merger agreement where she's old Frank, they
had agreed to indemnify her for legal expenses and pay
her defense costs and and legal cases including it turns
out and they litigated this but they lost. They were
(22:06):
on the hook to pay for her criminal defense, which
is like, seems a little weird that, like, she defrauded
them allegedly and now convictedly and they had to pay
for her legal defense. But it's not that weird, Like
that's actually like a thing that happens somewhat regularly is
that you know, you agree to and then the fire
your employees, even against charges that they stole from you.
But what has also happened is that she has racked
(22:28):
up astonishing, amazing, incredible legal bills, to the point that
people keep saying the legal bills might approach the amount
the one hundred and seventy million dollars that she defrauded
from David Morgan. The legal bills are now nine digits, according.
Speaker 2 (22:47):
To The Wall Street Journal, between her and her co
executive's legal defense to already cost more than one hundred
and forty two million dollars, So they're pretty dang close incredible, Yeah, clean,
just kidding.
Speaker 1 (22:59):
If the government to send you to prison and someone
else will pay for your lawyers, you might as well
hire all of the best lawyers and leave no stone
unturned in your defense, which I think is what happened.
Like she hired really fancy lawyers, and they put in
a lot of hours and they reviewed a lot of documents,
and like from where I set, that doesn't seem all
that useful, Like, you know, they she had a lot
(23:20):
of emails being like, let's do fraud, right, That's not true.
There is there is more of a defense of her
actions that I'm whatever. I mean, like, it's pretty bad fraud,
but if it's not your money, you might as well
spend as much as you can to take any shot
of kind of prism. But the other thing is that
and this is like at the Times, Ron Lever wrote
(23:41):
about this last week, like JP Morgan is trying to
claw back some of this money and like stop paying
for it. And one thing they're accusing her is like
you know, enormous wasteful, unconscionable spending on legal bulls. But
The other thing is they're like, she spent money on
salulate butter.
Speaker 2 (24:00):
Yeah, I'd never heard of it. Okay, I'm interested.
Speaker 1 (24:04):
And I don't exactly know why JP Morgan, in paying
her legal bills, would have paid her salulated better bills.
But I have a guess which I read about, which
is that law firms will serve you lunch. Like you know,
I used to work at a law firm and like,
(24:25):
so I once worked on a deal where like we
had a client and like their negotiating meurger with some
other client, and the other client had another law firm
and we were meeting at that other law firm's offices,
and our client was like, let's go to Walktell's offices.
They have better food. And so we went to our offices,
and we had better food, and it's much nicer to
(24:46):
be at our offices, Like you have like a sort
of negotiating advantage when it's at your office, right, And
I was like, yeah, that's so nice. We got a
real advantage by having better food. And we didn't cook
the food, you know, we ordered in, but like we
ordered in nice food. Like, on the one hand, it's
nice that we're doing this nice thing for the client,
but we're billing it to the client, like the client
pays for all of this eventually, And so there's a
(25:07):
lot of stuff like that, where like, if you're a
client and you're at the law firm and you're paying
the law firm an enormous bill, and you ask the
law firm to do anything at all for you, like
buy you a change of clothes because you've been there overnight,
really anything, they'll just do it for you, but then
they'll put it on your bill, right, Yeah, And so
I think that one thing that might be happening here
is that Jamie Wagen is not only paying the law
(25:28):
firms bills. They're paying the law firms expenses, and the
law firm's expenses could pay some stuff for Charlie Jovis.
Speaker 2 (25:35):
Yeah. Well, according to the Wall Street Journal, lawyers were
billing for twenty hours of work in a single day. Sure,
so maybe there were day shift and night shift lawyers
working around the clock.
Speaker 3 (25:45):
No, that's that's no, that's individual. That's the same I've
worked at a law firm.
Speaker 2 (25:51):
Yeah, that's awesome. Luxury hotel of grades, fine, the cellulite butter. Again,
I'm very interested in that. But we should probably say that.
A spokesperson for Charlie Avis says that Charlie says she
has nothing to do with that, and it's a ridiculous allegation.
Speaker 1 (26:04):
No, it's not obvious that they could have bought the
cell that had better for themselves. That's like you're on
a work trip.
Speaker 2 (26:11):
You're like, yeah, it's very it.
Speaker 1 (26:14):
You got it, Like you build enough hours, you work
enough hours. You're like, I'm going to expense everything on
this work trip.
Speaker 2 (26:18):
It is very heteronormative that we assumed it was for.
Speaker 1 (26:21):
Charlie Well, right, because like JP Morgan is sort of
accusing her of wasting their money.
Speaker 2 (26:27):
Yeah, but it could have been the law.
Speaker 1 (26:30):
The law lawyers, right, the lawyers brack up whatever experences
they rack angels.
Speaker 2 (26:35):
Yeah, this is amazing And I didn't fully appreciate that.
I would have just thought she's very expensive lawyers. But
I'm glad that so many different news outlets have tackled this.
Do you think that JP Morgan is going to be
able to stop paying for her legal defense?
Speaker 1 (26:51):
Maybe?
Speaker 3 (26:52):
I don't know.
Speaker 2 (26:53):
When does it start to impact their earnings? Like when
do we see analysts ask.
Speaker 3 (26:57):
Questions about this million dollar appeal?
Speaker 2 (26:59):
Someone asked Jamie Diamond next earnings call.
Speaker 1 (27:01):
Yeah, it's true, it's true, it's true. I think sometimes
about like the level of like mistake that you have
to make it a bank to be like asked about
on the earning call, and like to be fair, the
one hundred and seventy five million dollar acquisition of Frank
definitely got raised on some calls, right, Like Jamie Diamond
has addressed this, I think more than once. Yeah, with
(27:22):
like analysts and reporters, people be like, yeah, could you
do such bad due diligence and spent one hundred and
sef you have a million dollars in this company that
you know just have fay Gmail addresses. But now we're
getting to that level, getting to be a double dime.
Speaker 2 (27:34):
Christ had Charlie Javis is exactly my age. She was
born in March of nineteen ninety three. She said, so much,
what have I done?
Speaker 3 (27:43):
God?
Speaker 2 (27:44):
What a whirlwind that must have been. Yeah, and by
the time she gets out of prison, when she eventually goes,
I mean she'll still be a relatively young woman. Yeah,
early forties, a lot to live for. She could still
get a tattoo.
Speaker 1 (28:02):
And that was the Money Stuff podcast I'm Matt.
Speaker 2 (28:04):
Levine and I'm Katie Greifeld.
Speaker 1 (28:06):
You can find my work by subscribing to The Money
Stuffnoletter on Bloomberg.
Speaker 2 (28:09):
Dot com, and you can find me on Bloomberg TV
every day on the close between three and five pm Eastern.
Speaker 1 (28:16):
We'd love to hear from you. You can send an
email to Moneypod at Bloomberg dot net, ask us a
question and we might answer it on the air.
Speaker 2 (28:24):
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show.
Speaker 1 (28:30):
The Money Stuff Podcast is produced by Anamazerakis and Moses
ondem Our.
Speaker 2 (28:35):
Theme music was composed by Blake Maples.
Speaker 1 (28:37):
Amy Keen is our executive producer.
Speaker 2 (28:40):
And Sage Bauman is Bloomberg's head of Podcasts.
Speaker 1 (28:44):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
Bloomberg Audio Studios, podcasts, radio news. I got a haircut.
Speaker 2 (00:11):
That was actually that's the first thing I said to you, though,
after I told you that, I didn't want you to
watch me yogurt.
Speaker 1 (00:17):
But in other news, you got a neck tattoo.
Speaker 2 (00:22):
Yeah, I got a neck tattoo last Friday.
Speaker 1 (00:25):
It's a Batman.
Speaker 2 (00:27):
Yeah, it's the bat signal, the bat signal. Yeah, it's
a bat tat on my neck. It's my first tattoo.
A little intense to get it on the neck.
Speaker 1 (00:35):
You can't realize this tattoo, like having only one tattoo
and having apian neck tattoo is pretty good.
Speaker 2 (00:39):
The tattoo artist asked me that as well. The thing is,
I got the tattoo for my late pony Batman. I'd
had him since I was eleven. He passed away in May,
the day before my birthday. Also intense. I knew I
was going to get this tattoo when he did leave us.
So my answer to that question is when my cat
does get another tattoo. I wasn't expecting my TV producers
(01:04):
to be as into it as they were. We have
this thing called the.
Speaker 3 (01:09):
Tattoo is news, I know, but I thought.
Speaker 2 (01:11):
That, you know, we are a buttoned up financial news network.
I thought that they wouldn't be thrilled about it, but
they really wanted to do an on air reveal, so
we did. We had a man with a steady cam,
which is just a handheld camera essentially, come in and
zoom in on it at one point during one day show. Thankfully,
it wasn't scabbing yet, so it still looked kind of good.
(01:31):
It's in like a little yeah. Yeah, I think it's
healing nicely. It was really painful. Are you going to
get a tattoo?
Speaker 3 (01:42):
No? No, no, I've missed.
Speaker 2 (01:45):
I don't think you've had.
Speaker 1 (01:46):
Had a tattoott man.
Speaker 2 (01:48):
I was kind of thinking about that that my first
tattoo was at thirty two years old. It's still I
don't know.
Speaker 3 (01:54):
I feel like age, I'm too old for tattoo.
Speaker 2 (01:56):
But I feel like if you want a tattoo, you
probably get it in your teens twenties.
Speaker 1 (02:00):
No, I feel like a lot of people enter a
new phase of life from their thirties and become tattoo people.
Speaker 2 (02:05):
Yeah.
Speaker 3 (02:05):
Maybe yes.
Speaker 1 (02:07):
I saw it on Instagram on Friday and I said
to my wife, Oh, Katie got a neck tattoo, and
I was like, what, I'm like, Katy is not just
a financial news anchor, She's also an emo girl. Yeah.
Speaker 2 (02:18):
At heart, I'm just trying to get back to my roots.
You know.
Speaker 1 (02:23):
Hello, and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levine and I write the Money Stuff column
for Bloomberg Opinion.
Speaker 2 (02:34):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 3 (02:49):
Do you know what a lu booo is?
Speaker 2 (02:50):
I do? Are there impossible to escape? Did you know
what a little boo boo was? Prior to this week?
Speaker 1 (02:57):
I'm definitely aware of the booboos as an important cultural force.
Speaker 2 (03:02):
Yeah, do I.
Speaker 1 (03:03):
Know what they are? Even now? I couldn't pick them
out of a lineup.
Speaker 2 (03:07):
I really hate them. Sure, there's a print out of
a little Boo Boo between us on the table right now.
Speaker 3 (03:13):
And I like free creatures that they're freaky.
Speaker 2 (03:16):
They're freaky little things. Now you can trade derivatives of them.
Speaker 3 (03:20):
Kind of them?
Speaker 1 (03:21):
Yes, absolutely, yeah, you can trade binary options on the
boo boos. It's so good.
Speaker 3 (03:25):
Yeah, through enthusiasm.
Speaker 2 (03:29):
I really I don't get it. This is one of
the first cultural phenomenons where I just I feel like
I can't get into the headspace to pay sure.
Speaker 1 (03:38):
Yeah, this is like the four hundredth for me.
Speaker 2 (03:41):
Really, yeah, that's true. See I'm still getting neck tattoos.
This is my limit though, so Calshi and stock x
our partner, so that there's going to be event contracts
tied to many things.
Speaker 1 (03:58):
Ye, here's the Boo Boo's a third category of h
and also some trading cards. Trading cards.
Speaker 2 (04:07):
Yes, I don't understand this because I have my mind
dropped around what stock x does. And you know, there's
other alternative asset market places where you know, you can
buy shares of collectible items. I don't know how you
turn that into an events contract, right, this.
Speaker 1 (04:23):
Is what I've been writing about. It's a weird mechanism.
Speaker 2 (04:26):
Yeah.
Speaker 1 (04:27):
What you can do is you can buy a yes
no contract that pays off a dollar if, like, you know,
the price of some box of the Boo Boos is
over one hundred and twenty dollars and it pays off
zero dollars if the price of that box of the
booos is less than one hundred you know, like you
can turn any continuous variable into a binary. Right. You
can say, if the price of Tesla is above four
(04:48):
hundred dollars, then you get a dollar, and if it's
below four hundred dollars, you don't get a dollar.
Speaker 2 (04:51):
Right.
Speaker 1 (04:52):
But it's not the most natural no product.
Speaker 2 (04:55):
It seems not fun, but that's.
Speaker 1 (04:56):
It's lot fun. But I don't know, it's like kind
of interesting, right. I don't know the reason for this,
but I speculated on some reasons, the simplest of which is, like,
CALSHI is an event contract marketplace, right. I think that's
what it does. It lets your bet on whether or
not some event will happen. And if that's your lens,
then like you could turn anything in the world into
a yes no event, Right, And if you get money
(05:20):
for trading, then you want to turn everything in the
world into a yes no event. And so you sort
of look around and say what products can we trade?
And it's like, well sneakers, I was like, well sneakers
are not really yes no events, but if you have to,
you can make them into yes no events and you
can trade them.
Speaker 2 (05:36):
You know, convolute the question in such a way that it
becomes and it's not like.
Speaker 1 (05:41):
A crazy convolution, but it's like a little crazy it is. Yeah,
it's a little crazy. Like I was looking at their charts,
you know, and like they have like prices some sneaker
and like there's a chart and the chart is like
four different lines for the probabilities of different like price levels,
because you want the chart to be just like the price. Right,
there's an intuitive chart of a sneaker price, and they
don't show that into ay, so it's a strange mechanism.
(06:03):
Maybe this is just like a publicity stunt, but I've
enjoyed writing about it because like one thing that is
going on here is that there is a belief, possibly
a money motivated belief among people like who are in
prediction markets and who work at like big exchanges and
who are partnering with prediction markets that this is like
the path to be in everything exchange, which is like
(06:24):
the term that coinbase has used, like this is the
way that you can sort of suck everything in the
world into financial markets. And one point I've been making
this wee because it's like kind of a rickety way.
Why does it have to be a prediction market like this?
But it is something that people are pretty enthusiastic about,
because at the end of the day, if you're running
a financial market, like one big category of what you're
(06:45):
doing is offering people more opportunities to bet, let's say,
on more things. And this is the most general purpose
way that people have found to let people bet on things.
Speaker 2 (06:54):
Yeah. I get the betting argument. People like to bet, and.
Speaker 1 (06:57):
I don't know why they would run a bet on
like the yesterday.
Speaker 2 (07:00):
That's the thing. It has to be fun, right, and
it doesn't seem as fun versus like I'm going to
buy shares of a meme stock and hope it goes
to the moon versus I'm going to hope the price
of the box of the La Boo Boos goes above
this certain threshold.
Speaker 1 (07:13):
Yeah. I do wonder if this is like a baby
step on the way to some more moonworthy financial market.
Speaker 2 (07:20):
Yeah.
Speaker 1 (07:21):
One thing I've written is that the essential thing here
is that these are contracts with someone on either side
of them, right, Like you're betting against someone else, and
if you have a contract that can go to a
million dollars, then the person on the either side of
that has to put up collateral and could have to
put up a million dollars of collateral. Right, so you
have like a really complicated and risky margining system if
(07:41):
you're having bets that can go continuously as far as
you want in either direction. Yeah, Whereas like traditional prediction markets,
the bets are like you get a dollar or you
don't get a dollar. So the collateral and the margining
is a lot easier and the risk is a lot lower.
So these are like not super risky exchanges. The exchange
itself not a particular riskue proposition as compared to oh, say,
(08:02):
certain crypto exchanges we've talked about. And so going from
that system to a system where the price can be
whatever the price is is like a you know, risky
and complicated set of decisions, but possibly something that is
in the future if you want to be at everything exchange.
Speaker 2 (08:16):
Yeah, I do wonder how this can be manipulated this, right,
I mean events, contracts on.
Speaker 1 (08:24):
You know. The answer I think is very clearly that
it can't be because go on, who is trading this.
The way to the way to manipulate this is like
there's a contract on like the average price of some sneaker,
and I go and buy a bunch of the sneaker
to push out the average price, right, and then I
win on my prediction market contract. But I assume that
(08:46):
however big the market for the sneaker is, it's probably
not that big like treasury bounds. However the market for
the sneaker is, presumably the prediction market is like orders
of magnitude smaller, because like, some people buy sneakers because
they want to wear the sneakers weird, But like, how
many people are going to want to buy the contract
that's like, oh, for the sneaker, price will be about
(09:07):
one hundred and twenty dollars. So I think that it's
going to be very hard to manipulate because it is,
at this point, two days in or whatever, a very
small derivative on top of a yeah, moderately larger market.
But in the long run, sure, Like you know, you
have an event contract that is a binary, right, it
pays zero or one, and it's on some underlying thing.
(09:30):
And the event contract gets big enough and it's like
trading a penny below the threshold, You'll buy some of
the underlying thing to push it up about the threshold,
and you make a lot of money on the contract.
It's like very easy to manipulate in concept. It's probably
very hard to manipulate right now in reality, but like,
you know, give it time, get more things.
Speaker 2 (09:47):
I get it sea legs first.
Speaker 1 (09:49):
And the other thing is, you know, I think about
this all the time. Like the CFTC, the US Commodity's
Futures Trading Commission, regulates commodities futures. It doesn't like really
regulate the market for wheat, you know, but it does regulate, like,
you can't manipulate the wheat market if it's going to
affect commodity futures. So the CFTC has some like anti
manipulation powers. And if you put everything onto prediction markets,
(10:12):
then everything becomes a commodity. And like the CFTC has
to think about like were you buying those sneakers to
push out the price of sneaker futures?
Speaker 2 (10:20):
And then it's like, yeah, it's going to be interesting
to see how just the prediction market space matures, because
this I think is firmly silly season and I think
we can put it in that bucket.
Speaker 1 (10:33):
Yeah. I think there are two paths for it maturing.
Speaker 2 (10:35):
Yeah.
Speaker 1 (10:36):
One is like what everyone says, which is like it's
somehow like becomes a market for everything, and it's like
becomes like the way that companies and like real people
think about having risk and like predicting the future and
like understanding probabilities and potentialities to the future. And then
the other way is it's like a giant legalized sports book, right, yeah,
and that's kind of where my money is. But who knows,
(10:56):
who knows?
Speaker 2 (10:57):
Well, I was speaking to the CEO of CBO sure
last week.
Speaker 1 (11:00):
Probably not in the legal live sports book.
Speaker 2 (11:04):
No, no, So Cibo doesn't have their own prediction markets
outfit yet, but they're going to roll something twenty five minutes. Well,
they're going to roll it out in the next few months,
which is interesting because there's kind of a land grab
going on right now. I have to imagine that the
exchanges think about this all the time. They should've been.
Speaker 1 (11:22):
During commodity futures for years, and now it's like it
turns out they were running a sports book and they
didn't know it.
Speaker 2 (11:28):
Right. No sports, Cibo specifically is not going into sports
at least, that's that's what the CEO said mid November
twenty five. So we have the receipts and like that.
Speaker 1 (11:41):
Makes sense because like if you're like Calshier polymarket and
you're like a little hobbyist prediction site. And then like
sports is it's like enormous gusher of money. And then you
go into sports right if you're seabow, like you know,
if you have like treasury, Yeah, like you know, there's
like more money in sports books than there is is
in like traditional prediction markets. There's more money in real
(12:02):
financial markets than there's in sports books.
Speaker 2 (12:04):
Yeah, exactly. So they're focusing on economic and financial prediction
markets for the next forty five minutes.
Speaker 1 (12:14):
Synergies there with interest rates and whatnot.
Speaker 2 (12:16):
Yeah, for sure. Booze from La Boo boos to owls,
(12:37):
owls the blue cones. One interesting week.
Speaker 1 (12:41):
We've said of this before, but like you yes, your
first love besides your horse is ETFs. You love an ETF.
So we've talked about private credit. We've talked a lot
about retel private credit and like ETFs for private credit,
which is like a category that kind of sort of.
Speaker 3 (12:58):
Exists, trying to make it make trying to make it thing.
Speaker 1 (13:00):
And whenever we talk about that, I always say, there
is a retail exchange traded fund category for private credit,
and it is called a BDC or business development company,
which is a terrible name because it makes it sound
like it's a business development company, and that is not
what it is. I don't know what a business development
company would be, but it sounds like a company that
develops businesses, right, But in fact, a BDC is just
(13:22):
a private credit fund. It's just a pot into which
a manager like Blue Owl puts private credit investments.
Speaker 2 (13:30):
And it's publicly traded.
Speaker 1 (13:31):
It's totally traded, and so investors can buy shares a
traded BDC. Not all some are like private like not traded, yes,
but like a listed BDC is just a stock on
the stock market. You can buy shares. Anyone can buy shares.
You can sell shares in the market. It's a little
bit like you need tof with one really important distinction.
Speaker 2 (13:51):
Go on.
Speaker 1 (13:51):
You can't redeem like you can sell your shares in
the market. And so what that means is that the
price of the shares is the price of the shares.
There's no mechanism to make sure that the price of
the shares is in line with NAV, whereas like an ETF,
like you know, if like the shares are trading below NAV,
then like you buy some shares and you pop them
out of you know, pop the assets out of the fund,
and you get stuff at a Navy.
Speaker 2 (14:12):
In authorized participant.
Speaker 3 (14:15):
Whatever.
Speaker 1 (14:15):
With BDC's that's not necessarily the case, and it's therefore
not actually the case for whatever reason.
Speaker 2 (14:24):
And I feel like we got another lesson in that
this week with Blue Owl having to call off the
merger between one of its publicly listed BDCs and then
a private fund.
Speaker 3 (14:36):
Yeah.
Speaker 1 (14:36):
So it has a thing called OBDC, which is like
the Blue Al Business Development Company, which is a publicly
traded PDC, and it has a thing called OBDC two,
which is a private BDC. So private BDC is like
they sell it to you know, investors. It doesn't trade
on the market. And so if you're an investor in
(14:56):
OBDC two, the private one, you can't get your money
back by just selling on the stock market. And so
the way it works is that they have a redemption
mechanism where like every quarter they'll buy up to a
certain amount of the shares back if you want to, right,
so they'll offer to buy shares back and you can
tender or not. And in recent months there's been a
little tension. Yes, they have bought back anyone's shares who's
(15:19):
wanted to sell. But there's like been a little bit
more redemptions than they'd like, and there's like, you know,
a widespread sense that if it continued at that pace,
they would eventually get redemptions speak, which they're allowed to do, right, Like,
they can sort of buy back as much as they want.
And so to get out ahead of that, they announced
that they were going to merge these two funds. So
(15:40):
if you had shares of ABC two, the private company,
you'd get shares of OBDC, the public company, and then
you could sell those whenever you wanted, no problem, you
don't have to redeem anymore. And that caused some unhappiness
because OBDC won the publicly traded one happens to traded
a about a twenty percent discount and net asset value,
(16:03):
and so instead of being able to get back one
hundred cents on the dollar, you can get back eighty
cents on the dollar if you sell your public shares.
No one wanted that, Yeah, so they ultimately called off
the merger.
Speaker 2 (16:11):
Yeah. Specifically, when it comes to redemptions. In the third quarter,
they approved about sixty million dollars worth that was already
exceeding their pre set limit. Here the discount they've been
trying to address that, they've been doing, you know, a
bunch of share repurchases. They have a two hundred million
dollar program. But I could see how that would cause
some indigestion. Yeah, yeah, right, yeah, So now they're evaluating
(16:37):
how to go forward.
Speaker 1 (16:37):
Yeah, it's hard because like the publicly traded product seems
kind of like a better product for the manager and
getting people out of the private product into the public product.
The public product, for the manager's perspective is permanent capital, right,
Like they never have to redeem any of it. Yeah,
they can if they want to, and they have been right,
(16:58):
they've been doing buybacks, which you can think of a
buyback as like a way to address the discount and
make shareholders happy, or you can think of it as
like just an opportunistic trade where like they can buy
one hundred cents worth of stuff at eighty cents on
the dollar. Right. But with the private company, it's like
people complaining when they don't get liquidity. You have asking
(17:19):
for liquidity, so you have to pay up money when
you don't necessarily want to. It's a less good product,
but it is hard. To get people out when the
public product trades at a discount. Yeah, The other question
that one might ask is why does the public product
trade at a discount? And some of the answer for
that is, like everything trades at a discount, like clothes
(17:40):
on funds trading at a discount, and like the traditional
reason for that is, like you capitalize future fees in
the discount, and so like you know, yeah, you'd rather
own one hundred cents worth of loans than one hundred
cents of worth of loans plus like the fees you
have to pay Blue Howel for the rest of time,
but in November of twenty twenty five. The other reason
that there might be a discount is that there are
(18:01):
some people who believe you may not believe this, for
some people who believe that some private credit loans aren't
worth as much as private credit managers think they're.
Speaker 2 (18:10):
Yeah, that seems to be a more and more pervasive view.
Speaker 1 (18:13):
It's a you you Jamie Diamond said some word about cockroaches, et.
Speaker 3 (18:17):
Cetera, et cetera, and so Jeffrey Gunlock.
Speaker 1 (18:20):
Everyone not everyone. I shouldn't say that. Mark Lipschels, Yeah,
this is not like necessarily correct, but it is a
you that people have. And so one reason that a
publicly traded pot of private credit loans might trade at
eighty cents on the dollar is that some of the
people trading it don't really believe that the pot of
loans is worth the dollar. Yeah, and so if that's
the case, then, like one, this merger is awkward. But too,
(18:43):
the awkwardness around this merger calls awkward attention to people's
worries about valuation.
Speaker 2 (18:48):
Yeah, I mean you can also see this just in
shares of blue Owl Proper, which are down like forty
something percent this year. They're at their lowest since twenty
twenty three. A lot of that decline happened before we
got into any drama with the fund merger.
Speaker 1 (19:02):
Yeah, it's like a little you know, blue Owl as
a management company, Right, you don't get a pure sense
of like the valuation of the portfolio, but.
Speaker 2 (19:11):
People viewed as approximy I understand.
Speaker 1 (19:13):
Right, the price of blue Owl shares tells you something
about what people think about the future cash flows of
the private credit business. The price of OBDC shares tells
you what people think about what the current loans are
currently worth. Right, And like there's slightly different.
Speaker 2 (19:30):
Questions, slightly different. Right.
Speaker 1 (19:33):
The price of the Blue Owl shares going down suggests
that people think that the private credit party is over
coming to an end, not as good as it used
to be. That right, Yeah, the price of the business
developed company is possibly suggests cockroaches.
Speaker 2 (19:47):
Yeah.
Speaker 1 (19:48):
Possibly.
Speaker 2 (19:49):
Well, it's going to be interesting to see what happens here.
According to Bloomberg News, they have until April to find
a solution or will consider liquidating or dissolving the vehicle.
According to filings, typically there's you know, some wiggle room
around those deadlines.
Speaker 1 (20:03):
I will say pudating is like not a terrible outcome
for the childers because it's like, then you get one
hundred cents on the dollar.
Speaker 3 (20:08):
Yeah, assuming she's the loans one.
Speaker 2 (20:10):
Hundred and something better than eighty for sure.
Speaker 3 (20:13):
Yeah.
Speaker 1 (20:13):
Probably there's an incredible brain controversy. Let's say about Charlie.
Speaker 2 (20:35):
Javis another one.
Speaker 1 (20:37):
So, she was the founder and c of a company
called Frank that like helped students fill out financial informs basically,
and she sold it to JP Morgan for one hundred
and seventy million dollars. And the allegations are that she
sold it to them on the basis of like having
millions of devoted customers. And then it turned out that
(20:57):
all of the customer email addresses and her database were fake,
and they sent out, you know, like JP Morgan is
not really in the business of providing financialate advice, Like
JP Morgan bought Frank to get like access to this
like devoted young customer base, and then they sent out
an email to all of Frank's customers being like, hey,
sign up for JP Morgan credit card or whatever, and
like all the emails bounced in there like wait a minute,
(21:20):
and so they sued her for fraud and then ultimately
got referred to prosecutors and she was arrested in charged
with fraud and tried and convicted and sentenced to seven
years in person.
Speaker 2 (21:31):
And she's now I'm trying to find the title that
JP Morgan gave her because it was pretty good. But anyway,
go on.
Speaker 1 (21:36):
She was like, yeah, they bought Frank and she was
like made a managing director and head of Frank or whatever,
and it was.
Speaker 2 (21:43):
Like head of students something.
Speaker 1 (21:44):
Yeah, and then like they'd send out this email and
it all bounced and they're like wait a minute, and
they put her on leave and fired her and so forth.
But because she was a Japy Morgan employee and because
she had a merger agreement where she's old Frank, they
had agreed to indemnify her for legal expenses and pay
her defense costs and and legal cases including it turns
out and they litigated this but they lost. They were
(22:06):
on the hook to pay for her criminal defense, which
is like, seems a little weird that, like, she defrauded
them allegedly and now convictedly and they had to pay
for her legal defense. But it's not that weird, Like
that's actually like a thing that happens somewhat regularly is
that you know, you agree to and then the fire
your employees, even against charges that they stole from you.
But what has also happened is that she has racked
(22:28):
up astonishing, amazing, incredible legal bills, to the point that
people keep saying the legal bills might approach the amount
the one hundred and seventy million dollars that she defrauded
from David Morgan. The legal bills are now nine digits, according.
Speaker 2 (22:47):
To The Wall Street Journal, between her and her co
executive's legal defense to already cost more than one hundred
and forty two million dollars, So they're pretty dang close incredible, Yeah, clean,
just kidding.
Speaker 1 (22:59):
If the government to send you to prison and someone
else will pay for your lawyers, you might as well
hire all of the best lawyers and leave no stone
unturned in your defense, which I think is what happened.
Like she hired really fancy lawyers, and they put in
a lot of hours and they reviewed a lot of documents,
and like from where I set, that doesn't seem all
that useful, Like, you know, they she had a lot
(23:20):
of emails being like, let's do fraud, right, That's not true.
There is there is more of a defense of her
actions that I'm whatever. I mean, like, it's pretty bad fraud,
but if it's not your money, you might as well
spend as much as you can to take any shot
of kind of prism. But the other thing is that
and this is like at the Times, Ron Lever wrote
(23:41):
about this last week, like JP Morgan is trying to
claw back some of this money and like stop paying
for it. And one thing they're accusing her is like
you know, enormous wasteful, unconscionable spending on legal bulls. But
The other thing is they're like, she spent money on
salulate butter.
Speaker 2 (24:00):
Yeah, I'd never heard of it. Okay, I'm interested.
Speaker 1 (24:04):
And I don't exactly know why JP Morgan, in paying
her legal bills, would have paid her salulated better bills.
But I have a guess which I read about, which
is that law firms will serve you lunch. Like you know,
I used to work at a law firm and like,
(24:25):
so I once worked on a deal where like we
had a client and like their negotiating meurger with some
other client, and the other client had another law firm
and we were meeting at that other law firm's offices,
and our client was like, let's go to Walktell's offices.
They have better food. And so we went to our offices,
and we had better food, and it's much nicer to
(24:46):
be at our offices, Like you have like a sort
of negotiating advantage when it's at your office, right, And
I was like, yeah, that's so nice. We got a
real advantage by having better food. And we didn't cook
the food, you know, we ordered in, but like we
ordered in nice food. Like, on the one hand, it's
nice that we're doing this nice thing for the client,
but we're billing it to the client, like the client
pays for all of this eventually, And so there's a
(25:07):
lot of stuff like that, where like, if you're a
client and you're at the law firm and you're paying
the law firm an enormous bill, and you ask the
law firm to do anything at all for you, like
buy you a change of clothes because you've been there overnight,
really anything, they'll just do it for you, but then
they'll put it on your bill, right, Yeah, And so
I think that one thing that might be happening here
is that Jamie Wagen is not only paying the law
(25:28):
firms bills. They're paying the law firms expenses, and the
law firm's expenses could pay some stuff for Charlie Jovis.
Speaker 2 (25:35):
Yeah. Well, according to the Wall Street Journal, lawyers were
billing for twenty hours of work in a single day. Sure,
so maybe there were day shift and night shift lawyers
working around the clock.
Speaker 3 (25:45):
No, that's that's no, that's individual. That's the same I've
worked at a law firm.
Speaker 2 (25:51):
Yeah, that's awesome. Luxury hotel of grades, fine, the cellulite butter. Again,
I'm very interested in that. But we should probably say that.
A spokesperson for Charlie Avis says that Charlie says she
has nothing to do with that, and it's a ridiculous allegation.
Speaker 1 (26:04):
No, it's not obvious that they could have bought the
cell that had better for themselves. That's like you're on
a work trip.
Speaker 2 (26:11):
You're like, yeah, it's very it.
Speaker 1 (26:14):
You got it, Like you build enough hours, you work
enough hours. You're like, I'm going to expense everything on
this work trip.
Speaker 2 (26:18):
It is very heteronormative that we assumed it was for.
Speaker 1 (26:21):
Charlie Well, right, because like JP Morgan is sort of
accusing her of wasting their money.
Speaker 2 (26:27):
Yeah, but it could have been the law.
Speaker 1 (26:30):
The law lawyers, right, the lawyers brack up whatever experences
they rack angels.
Speaker 2 (26:35):
Yeah, this is amazing And I didn't fully appreciate that.
I would have just thought she's very expensive lawyers. But
I'm glad that so many different news outlets have tackled this.
Do you think that JP Morgan is going to be
able to stop paying for her legal defense?
Speaker 1 (26:51):
Maybe?
Speaker 3 (26:52):
I don't know.
Speaker 2 (26:53):
When does it start to impact their earnings? Like when
do we see analysts ask.
Speaker 3 (26:57):
Questions about this million dollar appeal?
Speaker 2 (26:59):
Someone asked Jamie Diamond next earnings call.
Speaker 1 (27:01):
Yeah, it's true, it's true, it's true. I think sometimes
about like the level of like mistake that you have
to make it a bank to be like asked about
on the earning call, and like to be fair, the
one hundred and seventy five million dollar acquisition of Frank
definitely got raised on some calls, right, Like Jamie Diamond
has addressed this, I think more than once. Yeah, with
(27:22):
like analysts and reporters, people be like, yeah, could you
do such bad due diligence and spent one hundred and
sef you have a million dollars in this company that
you know just have fay Gmail addresses. But now we're
getting to that level, getting to be a double dime.
Speaker 2 (27:34):
Christ had Charlie Javis is exactly my age. She was
born in March of nineteen ninety three. She said, so much,
what have I done?
Speaker 3 (27:43):
God?
Speaker 2 (27:44):
What a whirlwind that must have been. Yeah, and by
the time she gets out of prison, when she eventually goes,
I mean she'll still be a relatively young woman. Yeah,
early forties, a lot to live for. She could still
get a tattoo.
Speaker 1 (28:02):
And that was the Money Stuff podcast I'm Matt.
Speaker 2 (28:04):
Levine and I'm Katie Greifeld.
Speaker 1 (28:06):
You can find my work by subscribing to The Money
Stuffnoletter on Bloomberg.
Speaker 2 (28:09):
Dot com, and you can find me on Bloomberg TV
every day on the close between three and five pm Eastern.
Speaker 1 (28:16):
We'd love to hear from you. You can send an
email to Moneypod at Bloomberg dot net, ask us a
question and we might answer it on the air.
Speaker 2 (28:24):
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show.
Speaker 1 (28:30):
The Money Stuff Podcast is produced by Anamazerakis and Moses
ondem Our.
Speaker 2 (28:35):
Theme music was composed by Blake Maples.
Speaker 1 (28:37):
Amy Keen is our executive producer.
Speaker 2 (28:40):
And Sage Bauman is Bloomberg's head of Podcasts.
Speaker 1 (28:44):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
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