Bloomberg Businessweek Weekend - July 8th, 2022

edition of Bloomberg Business Week. Well, this week you're going to hear from many members of our Bloomberg team as Tim and I were managing ourselves or our families through COVID, And I gotta say, Tim, it's been a crazy couple of weeks. I've had COVID twice. Yeah. I mean, look, first of all, a big thank you to the team here at Bloomberg Radio for managing through it, and then

our colleagues for jumping in for us. But hey, we're on the other side of it, Carol, hopefully truly on the other side of it at this point, right, Yeah, totally fingers crossed. Uh. And it was another crazy week, right, Yeah, it was. It's look, you know, they got John monthly jobs report happened. It's become even more key in today's environment where investors just continue to consider the possible trade

off between a risk session and aggressive fed tightening. Talk about being between a rock and a hard place, all right. Also ahead, we're gonna talk about a lot of stuff, including supply chains and the world's biggest business problems. Once CEO says Quantum Computing might just be the fix. Plus swamp Poodle just a funny name, not to former chairman and Mellon Bank CEO. We're on his hometown and how his humble upbringing set him up to lead one of

America's biggest financial institutions. All of that to come. First up, we love love to hear about the Heist. That's the special double issue of Bloomberg Business Week. It is out now on newsstands, online and on the Bloomberg. We're bringing you stories from it throughout the next couple of hours.

And to get us all going on the Heist issue, Bloomberg Business Week editor Joel Webber gives us the lowdown on this year's scams and snitches, joined here by Paul Sweeney, a Bloomberg Surveillance and senior Markets editor, Mike week It, Oh my gosh, it's like the ultimate Summer bee Tree.

Number of years ago. We decided that this theme, this topic UM deserves to go cover to cover, So we go from the front cover to the back cover and we go all in on heist, which we open with a little uh opening paragraph that just also reminds people that you know, for these are mostly intended as sort of school degree stories, but there are some some real heists in the headlines right now that people people feel very much affected by. So where we acknowledge those as well.

So I'll talk to us about the lot lottery lawyers and what that heist is about. That's when I haven't had a chance to read yet. The story UM is about UM, a lawyer on Long Island who basically created a new business which was advising UM people who won mega millions or powerballs, and he put together actually a little modest portfolio of winners and then help them start advising advising them and UM sort of being a financial

advisor to them. And that's where the story kind of snowballs and it turns into this cast of characters that may or may not have scammed him. There there is a ongoing um H lawsuits, So I have to say this is all allegedly UM, except that the details of the story. You just can't make this stuff up, all right, A little bit more somber one perhaps is taken tax leans cost generations of Black Americans their land? How does that work? Yeah, so this was a far more sober one.

UM and Margaret new Kirk came to us with this UM a number of months ago and said that she had found out about a family in South Carolina that generations ago actually ended up losing. It's losing their land. And the story is tragic. It's about the great grandmother who who basically was paying UM what she thought was UM taxes to UM via sort of a white intermediary in South Carolina who was taking money to the government

on her behalf. It turns out that he had actually purchased the land from the government via a tax ling, and that the money that she was giving him was actually rent, and he broke this news to her UM upon the time that he was actually selling that land.

And the story goes into not only the family story of how they missed out on this land that is actually just an incredible location and in South Carolina, but also how this is a practice that writ large across America, not only used to happen but continues to happen, and because of that, black Black Americans UM end up losing out on wealth. You know, real estate is a source of wealth and that intergenerational thing that happens between families, UM is something that a lot of Black Americans have

missed out on. So we felt like that was an appropriate one to bring him to the highst issue as well. Joel, if you step back for a minute, you know you I don't know how many years in a row you've done this highest five five years that, so you're probably up to thirty stories by now. Where's the heist capital of the world in your opinion? I would actually put it as as Florida. I think the nefarious deeds that go down or make it make it a special place that I think we went a little light on Florida

in this issue. But sleeper um Los Angeles. And there's another great one in this issue called the open house Hunters who who hit l as rich and famous. And this story is incredible because it's about UM this duo who would go scope houses. Also allegedly that this trial

is coming up in August. Uh, they would go scope open houses and it turns out a lot of these open houses were owned by celebrities, and so they were actually able to come into homes kind of scope worth the goods were and then come back later and do their do their stuff. And this was a year's long effort. This was a massive crimes free and they took luxury bags, they took they hit Usher Usher up to have Lebron James's Cleveland calves ring from when he won the championship

that got stolen. It's just amazing read. And some of these brake ins were just like the I think the cops and the detectives were like totally bufuddled, like they had like parkur abilities on top of everything else, and we're like dropping in from skylights like in Mission Impossible. So it's some fun stuff here. That was Bloomberg Business

Week editor Joel Webber. Clearly, there's plenty to look forward to and this year's special Heist issue, and a big thank you, of course to Paul Sweeney of Bloomberg Surveillance and Senior Markets editor Mike Reagan for bringing us that interview. Coming up, Joel is back, this time with Bloomberg reporter and heist detective Zeke Fox to tell us about a rapper's crypto scheme and how it all went terribly wrong.

You're listening to Bloomberg Business Week. This is Bloomberg. This is Bloomberg Business Week with Carol Man here and Bloomberg Quick Takes Tim Stinovin from Bloomberg Radio. An instant classic from this year's Heist issue. It's about a novelty rapper and her startup guy husband who are now facing trial for their roles in an eight billion dollar hack of cryptocurrency exchange bit fin x that took place back in So how do they pull it off? To begin with?

How did they get caught? And what happened to hold that money? To tell the tale, we've got Bloomberg Market Senior editor Mike Reagan and Carol Well. They turned to the individual who wrote the piece, Bloomberg News Financial Investigations reporter Zeke Fox, along with Business Week editor Joel Weber. It might actually be the biggest hack of heist of all time, right and see how does that? How does

that happen? The next was one of the biggest crypto exchanges in the world, but like a lot of exchanges, it had what appears to be very poor security and somebody got into the exchange and you stole the passwords do there are bitcoins and transferred out more than half the bitcoins, more than a hundred thousand bitcoins, And for years there was a mystery what happened, and the value of those bitcoins rose and rose until at their peak,

the missing bitcoins were worth more than eight billion dollars. Zeke, I wanted to ask you about the two main characters in this story, Heather Morgan, a k razzle razzle Cohn and her husband. Um, you describe what I consider some major crimes against music on her part and her rap music just awful, awful rap music is is her claim the theme. But I don't get the you know, I don't get the opinion that she was a criminal going into this. She just sort of stumbled into this heist.

To walk us through how what we know about how these two got involved in this caper? Yeah, I mean that was what was so crazy is that in February, out of nowhere, the Department of Justice announced that they've recovered most of the bitcoins and arrested to people for money laundering. There's this couple, Heather and Ilia and Heather, as I said, the story she's got the rap persona. It was just it seems so unlikely. It's like something

you wouldn't believe if someone made it up. Um. And yeah, she has like a very standard or not very standard but her back, but nothing about her background suggests that she would get involved in something like this. But the fact is when they when the authorities rated their apartment down in the Financial District, what they found on the husband's cloud accounts was an encrypted file that contained the

passwords to all these stolen bitcoins. And like in bitcoin, you don't want anyone whoever controls these private keys, these passwords controls the coin. So the fact that he's in possession of all the sold and funds is like a strong suggestion that uh, he may have been the one who took them. And the authorities also have evidence that Morgan participated in efforts to move this money and to conceal its origins and that's why she got arrested too.

Um but uh yeah, it's it's it really is mysterious how uh if these two are in fact the hackers, how they got into it, um or why they were trying to attack so much attention after they had pulled off like this crazy crime. So so yeah, break that down for us, because obviously this hack happened a while ago, and then it was sort of this big mystery and what what was the thing that triggered authorities becoming increasingly interested.

So with bitcoin, it exists as like an entry on a distributed database, so anyone could look up the addresses where the hackers sent the funds like this was public and I could see that the bitcoins were in like these numbered addresses, but there's no association with any person um. So the problem was that the reputable bitcoin companies don't want to touch bitcoins that they know come from a

crime like a hack. So the hackers need to find some way to move these bitcoins to someone who didn't care. And they found one place, which is called Alpha Bay, which would place essentially eBay for like drugs and guns on the dark West. And the thinking was that you send the bitcoins to alpha Bay, and then you inside Alpha Bay, all the funds are mixed up. So but then when you withdraw the bitcoins from alphabet to a new address, no one will know that the new address

is associated with the hack. Um. The problem was that the authorities, in particular the cyber crime unit within the I r S was on like this crazy streak of cracking cryptocrimes, and one of the places they went after was Alpha Bay. And after like this raid with the Royal High Police in Thailand, they were able to get Alphabat's computers and that meant to have all of Alphabat's internal records and they could connect transfers to Alpha Bai with transfers out of Alpha Bay, so transfers that the

hackers thought were safe. We're now UH able to be figured out. But the fact is that there was this was such a trove of data that the authorities were bringing all sorts of cases related to this. It took him a few years before UH they realized what they had and were able to gather enough evidence to UH search Heather and Ilia's apartment and and and Zeke quickly. Where where do things stand now is in present a

waiting trial. Heather is out on bail, and there's evidence that they sent some or whoever had these bitcoins sent them to another dark net market in Russia called Hydra. And on Hydra you could pay someone in bitcoin and have them very rubles underground for you, and then you could go dig them up later, so you never know. They take a lot of money to hydra. There could be some fundles of rubles sitting somewhere waiting for Heather

and Ilia to come they come up. That was Bloomberg News Financial Investigations reporter Zeke Fox, with Business Week editor Joe Weber, Mike Greek and of course with us there as well. We'll have more from the Heigst issue, but later on on our broadcast. Still ahead on Bloomberg Business Week, the CEO of a multimillion dollar software company says quantum

computing can solve supply chain issues. Find out how. On the other side, this is Bloomberg Broadcasting from the financial capital of the world, Bloomberg Eleve in Frio in New York, to Washington, d C. Bloomberg to Boston, Bloomberg one oh six one to San Francisco, Bloomberg nine sixty to the country Sirius XM Chado one nine ten and around the globe the Bloomberg Business app and Bloomberg Radio dot Com.

This is Bloomberg Business Week. My next cast is all about the zeros and the ones and how they can solve the world's biggest business problems. The CEO of Quantum Computing, Inc. Robert Listkowski, spoke with Paul Sweeney of Bloomberg Surveillance and senior markets editor Mike Reagan. They began by asking a very important question, what exactly is quantum computing. It's an exponentially much more powerful, computationally way of looking at really

complex problems. You know, I can get into the physics of it, right. Classic computers look at ones and zeros. Quantum computers look at ones and zeros and a zero and one at the same time. You can get into all that stuff, right. But I think at the end of the day, for the average business user, people are need to know that we can do really really complex types of computations, dealing with supply chain, dealing with all sorts of variables in ways that classical computers can't even

begin to achieve. Yes, so, Robert, your company's Quantum Computing Inc. Qubatt is the ticker simple. You tell us a little bit about some of the products you're offering or or having development. I know a lot has to do um with stuff like security support and and that sort of thing. Can you walk us through some of your main offerings and and uh, you know, what we should need to know about them. Sure, so we started off as a

software company. We're a platform that was designed to allow business users or any user that for that matter, to connect up to a quantum computer. Quantum computers don't have the same programming language that classical computers do, right, You can't. You can't take what you've done on a Windows machine or an IBM three sixty or whatever the machines are out there and then be able to do that on a quantum computer. They need different programming techniques, right. They're

very complex systems. You need quantum programmers to be able to do these things. So we created a platform that would allow a business user to formulate a problem that could run on not just one quantum computer, but any number of quantum computers. And that way we took the heavy lifting out of the equation and allowed people to be able to do things today the challenges quantum computing as a domain hasn't quite achieved the level of capability

that we needed to get. Right. It's a process. It's an evolutionary process that says, and we can do great things today, but we're gonna really do great things, better things tomorrow because quantum computers are going to be much more capable in a few years than they are today. Classical computers can do things that quantum computers can do right now and compute, you know, computational problems that um

they can really give good results for it. But but over time quantum computers are going to continue to evolve into really really capable machines. So we looked at a way that we could bring business users to those machines, get them ready to be quantum ready as as machines are coming on on online solve certain problems dealing with

supply chain and other optimization problems. However, just recently, and this is really exciting for us, we just acquired a company, a photonic computing company called q photon, which actually uses photonics a different way to look at a way of computing quantumly and we can actually solve some problems today that are actually business problems, business related problems. So there's a way to apply quantum computing and techniques today that um quantum computing can actually solve and we have a

computer that can do that. So it's really interesting is that we have become a full stack quantum computing company. We're no longer just a software company. Q Photon is no long going just a hardware company. Together, combining these two companies, we can do an end to end approach towards providing solutions to real world problems. Ask you about that whole notion of the full stack you know, Um, so much of what we've talked about this year has

been the semiconductor market. I'm guessing in your line of work, you need access to the best, you know, fastest chips available. Is this whole uh supply chain issues with the chips themself throwing you any curveballs? Is it a problem at all? No, it hasn't been. I mean, first off, we're not producing computers at scale yet, We're just producing a couple and three of them at a time. So for us, supply chain issues haven't haven't really manifested themselves in terms of

the scale that you know most supply chains are seeing that. Secondly, the chips that were manufacturing and we are manufacturing chips are are much different than what you see in the microchip industry. So are is a very specialized, very unique types of materials that go into creating the photonics that are required for our quantum computing. So we have a bump into that now in the future perhaps, but I think we've got, you know, our plans and scaling help

us kind of mitigate that kind of risk. But I but to your point, you know, a lot of the computer industry is suffering from those those microcircuits and the the microchips types of supply chain issues, and they will be for the foreseeable future. We, on the other hand, don't don't We're not gonna be bumping into that. And you really can't compare the two. The quantum computer is gonna be able to do things that the classical that you know,

several many classical computers couldn't do. Tied together quantum. One quantum computer is gonna be able to achieve um computational superiority um that those classical computers can't do. So supply chain issues won't be as impactful to the quantum industry as they are in the classical industry. A lot to take in there. Big thank you to Robert Liskowski, he's CEO of Quantum Computing, Inc. Joined there by Bloomberg Surveillance is Paul Sweeney and Senior markets editor Mike Regan. You're

listening to Bloomberg Business Week. Up next, how former mail In Bank CEO Marty McGinn's humble beginnings set him on a path to the top of one of the America's biggest financial institutions, and why he thinks the US is at a heightened risk of recession. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. Swampoodle funny word, right, Well,

it's also the name of a North Philadelphia neighborhood. It plays a big part in our next guest new book. It's called From Swampoodle to Melanbank Ceo, An Irish Americans Journey, The autobiography of Martin G. Mcgwinn Jr. The former chairman and CEO of Melonbank, spoke in depth about his upbringing with Bloomberg Radio is Paul Sweeney and Senior Markets editor Mike Reagan. Marty, I love the title, but you gotta

tell me what or where is swampoodle. Well, it certainly is an unusual word, and it's it's a neighborhood in northern Philadelphia where are a lot of Irish immigrants settled in the early nineteen hundreds, including my grandparents. So it seemed like a good place to start, uh, telling my story. And so it is from swamp poodle to Melanbank CEO. Hey, Marty, Uh, you know, I'm just kind of seeing here. You grew up in Princeton, graduated from Villanova and Villanova Law school,

and then you starved into Marine Corps Vietnam. Tell us about that experience. Well, Uh, I joined the Marine Corps while I was in college because they had a program where you went down during summers in college and went through your your your basic training, and then you were commissioned when you graduated. And in my case, I was guaranteed the deferments. I could go to law school and

then serve on active duty. And that seemed a good way for me to commit to serve my country at the same time be able to start my career in

a way that it was consistent with my planning. And and in the Marine Corps, you may know, I mean they have a saying every man as a fighting man from the comment on on down, So you have to get through all the same basic training even if you intend to have or hope to have a basic legal responsibility, which is what I did, and then serving in Vietnam was what all Marines were doing during those days when

I was was active. You know, Marty, I always like to talk to UH people who have had experiences running a bank, because I feel like they have such a unique perspective on the economy and markets, almost like no one else can sort of view from having been in

your position. And I'm curious to know if we're here sitting in an environment with more than eight percent inflation, treasure yields going up one day down the next year, stocks in a bear market, what's your sort of read on the economy and and how we should think about markets and and the whole banking industry and and and everything UH in your old wheelhouse these days. That's a pretty broad question, but let me try to answer it, UH,

as far as the economy is can concerned. I mean, I think we've had a fairly strong economy for quite a few years now, and then when Congress really stepped up the spending, I think that really is what triggered the first move toward inflation. UM. And then when you have, of course, the war in Ukraine and the energy problems

and all the other issues. UM. And then frankly, I think the FRED was FED was very slow in moving to raise interest rates, and so the challenge now looking ahead, and my opinion is the FED would love somehow to get us what they call a soft landing, which means they contain inflation without causing too much disruption in the economy. But that's it's been very hard to do both historically and I think in this environment with so many uh problematic issues UH, that I think it's going to be

difficult to do. So my own opinion is I think there's a greater chance for a recession UH than previously, So maybe there's it's more likely than less less likely. I think, going back to the banking part of your question, uh, A government regulation has been increasing in less decade or so UH, and banking it very difficult to compete in an economy where you're not only dealing with non financial institutions that are regulated differently, but you're dealing with competitors

on a global basis. So it's a very difficult environment. And of course you're right, I mean the banks have to work very hard in the economy as all companies, but still they're more directly affected. So this is a very difficult environment I think for banking loves to get some color from you. You were chairman at CEO of Melon Financial Corporation from to two thousand six. Talk to

us about that time and some of the challenges you faced. Well, it would that that period of time followed a very strong stock market, which was not only important for how corporation shares trade, but of course, Uh, we sold our retail banking business, so I wanted to move away from being a more traditional bank to a to a more focused organization with our strategic focus on asset management asset servicing. So that slower market period after a stronger market period

also had a major impact on our business. So it was it was a major struggle with one of the you know, the poorest equity market since the depression. You know, Marty, I've read a few pages from the book earlier and uh really Uh one anecdote that caught my attention was when you were a kid, uh going to see the Philadelphia Athletics play at Connie Mack Stadium. That's going back called but here's and as I said before, I Marty and I have such a similar background, I wondered if

we were related. But here's what really made me think we're related. Paul's he used to wait to hold about halfway through the game so he could get in for free, not after okay, But but Martin, what are you know with that kind of that kind of humble and you know, hard working upbringing that you described in the book from your family in the swamp Poodle uh section of Philadelphia. How does that serve you eventually in the role of

a bank ceo? You know? Is I'm guessing you know you earned the you learned the value of a dollar very early, and I'm guessing you must have carried that on throughout your career as a banker. Is that is that fair to say? No, I think it's it's very fair to say, and I would expand on that slightly. Yes.

My my grandparents were Irish immigrants. My grandfather was an operator of a trolley, my grandmother was a homemaker, uh, And so we began with very modest the backgrounds, and so I think that certainly teaches you that not only the value of a dollar, but I think also the need to work hard, uh and to be committed do what you do and frankly, I also think of error. But my Irish American background was very important too, and in uh inculcating a desire to work hard, but also

to maintain a sense of humor, especially about myself. And and I think those combined backgrounds have been very important in my life. That's true. The Irish are very self deprecating, Paul, Paul. It's rare to get three Irish guys from Philly together like this without someone getting in trouble. I don't know. I remember Conny mack Stadium was right on the edge of swamp poodle too, so it was right there. That's why I wonder where the term swamp poodle? What's the

origins of that today? It's a good question, and I've tried to find the answer, uh, and it's not a very satisfactory answer. So I'm afraid I can't give you a very good answer. But somehow it's stuck, and I think many people don't know about it today, which is

why it's sort of made the title kind of intriguing. Yeah, yeah, it's interesting, So Marty, if you think about that, you know, the US banking system, over the last fifteen years, we had the great financial crisis two thousands seven, two thousand and eight, and the banks obviously played a role there. We've just gone through two and a half years and still dealing with this global pandemic, and that's been an

uncertain time. How do you just give us your thoughts on kind of as you look at the US banking system here today, kind of what are your views in terms of how it's performing, the relative health of it, and kind of maybe what it can do better. Well. I think these last fifteen years and and a lot of the extra regulations have made doing business we're burdensome

that it needs to be. But on the other hand, some of those regulations and the requirements that banks have to comply with in terms of capital have also made the banks much stronger. And so I think today the banks in general are very strong, uh And I think these tests that have been applied periodically have shown that

to be the case. Obviously, the economy now is a major challenge, but I think of banks are well positioned and and I hope we can get a balance in the regulatory environment that you know, dissuades on inappropriate risk but also encourages appropriate risk taking and keeps our banking system strong because it's so important to the economy. You know, Marty Paul and I were just talking about how it seems like there was almost a bubble in just about

every asset class the last few years. That's you know, collapsing before our eyes now, from stocks to even treasuries were probably overvalued there Um. The one bubble that perhaps exists that hasn't burst just yet is housing. You know, we've had this tremendous run up in housing prices, and obviously that caused a big problem when they came back

to earth during the financial crisis. To get back to that idea of regulation I mean, is that the current banking system knock on wood in much better shape to absorb some roughness in the housing market if these prices

come back to earth. Yeah, I think for sure. Part of the problem with the prior crisis was that the bank lending, and not just banks, by the way, but even non banks, a lot of different financial institutions which were less regulated, where obviously lending sometimes without requiring any collateral at all, and and so at look at Lehman Brothers, they were so highly uh under capitalized and over leveraged that that's what ultimately led to their demise. And I

think today banks are stronger. I think they're the requirements against lending, especially on on houses will protect the banks and hopefully homeowners as well during this crisis. But uh, remember too, part of this bubble, if that's what it is, or at least the massive appreciation is being driven by supply and demand, and there's just, you know, far more demand than there is supply, and that's being reflected many markets.

On the other hand, as interest rates go up, that will have an impact on people that have borrowed, but hopefully both they and the banks are in better position to have that's former Melan Banks CEO Marty mcgwin with our Paul Sweeney and Mike Reagan. Mcgwin's autobiography it is out now, and that reps up the first hour of the weekend edition of Bloomberg Business Week from Bloomberg Radio. I'm Carol Masser, I'm Tim Stinovic. Ahead in our next hour, we'll talk with Free Vago CEO Axel Heafer on the

all important summer travel season. The experience is not good. Prices are very high. Um, you have you have, as you said, you have labor shortage everywhere, so the outlook is actually not that good. Plus another gem from the Business Week heist issue all about a New York lottery lawyer who won his clients trust then lost their mega millions.

This is Bloomberg. This is Bloomberg Business Week inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news as it happened. Sloomberg Business Week with Carol Messer and Bloomberg

Quick Takes Tim Stinovic on Bloomberg Radio. Plenty ahead in our second hour of the weekend edition of Bloomberg Business Week, including the CEO of travel services company Travago on temperate expectations and hot destinations for summer travel, and the story of a New York area lawyer who built a practice by giving legal and financial advice to lottery jackpot winners who's now accused of fraud. First up this hour. Though in addition to Friday's job print, new f O m

C minutes came out this week. Official sy A fifty or seventy five basis point hike come in later this month to help break down the latest missive from the US Central Bank. Bloomberg News senior markets reporter Katie Greifeld and senior Markets editor Mike Reagan spoke with Don McCree, head of commercial banking at Citizens Financial Group. I think

it was pretty much as expected. I think share Powell in its testimony a few weeks ago was was certainly pretty hawkish and uh, we're leaning towards probably a seventy five basis point move. Again reinforced that there's a likelihood that the economy could slip into some kind of recession. Whether it's deeper shallow is to be seen. Don it strikes me as a pretty uh difficult environment to be in commercial banking. One day we have interest rates rising

really vastly. The next day they're coming back down. The focus seems to shift from concerns about inflation so concerns about the economy possibly falling into a recession. What is sort of the atmosphere among your clients right now. Are they sort of pulling back on demand for loans at a time like this, or is there even more demanding It's actually pretty good. I mean, if anything, there's more demand at the margin. Um, that's largely a function of

a lot of the other markets. Being so disrupted. So you know, the equity markets are clearly you know, selling off. There's not a lot of new capital being raised there. The high yeld market has been essentially closed. I think there was billion of issuance in the in the last quarter, which has got to be a record low and for very light light calendars going forward. And the institutional loan markets are kind of backed up right now and really kind of hanging to the sidelines still. I see what

the economic picture. So we've had a pretty heavy client flow um. And remember in a in a bank like ours, our loan book is floating rates, so as rates go up, it's a short term index and floating rates, so as rates go up, that's generally a good thing, you know, for our P and L and bank earnings. And then on the risk side, I would say that we're seeing very little stress in the portfolio. I think that CEOs

got very serious during the pandemic. They adjusted their businesses, trim their workforce, adjusted their working capital um and that's continuing as they stare into you know, a potential recession. So people are very focused and they're taking actions on their business to try to make sure they can survive. Whatever the economy throws at them, and on what kind

of conversations are you having with clients right now? Because if I, you know, look across Wall Street commentary that I get in the morning, if I look at you know, consumer sentiments surveys, seems like there's a lot of angst out there. Would you say that that's showing up in some of the conversations that you've been having as well it is, I'd say, sarn. I wouldn't. I wouldn't. I

think anst as a little bit strong. Um. I think they're trying to figure out ways to automate and become less dependent upon the labor because that continues to be a real constraint being able to hire people. That's constraining the sales line in a lot of our clients. The one one piece of good news that they're not worried about is interest rates because a lot of companies refinanced over the last two or three years, taking advantage of the really low rates that were available in the marketplace

and turned out their debt. So we're not facing a wall of maturities that we might otherwise be facing right now. Um. And they're they're if they're not if they're not termed out. There's been enormous amounts of hedging activity boast in the currency markets and in the commodities marketing, in the interest rate market, so people are people are somewhat protected in a rising rate environment, which is the other thing you always worry about. So don how does someone in your

position sort of think about and prepare for recession? You know, is it time to start tightening up your underwriting standards on on the loans you are issuing or is it too early for that? You know, how do you sort of navigate such We're definitely tightening. We're definitely tightening a little bit at the margin um and being more selective, particularly if it's not an existing client. You know. Number one is is we've banked in a large number of

our clients for many, many years. We've seen them go through cycles. We've seen how the management's behave. You know, we're literally in touch with them weekly or monthly, really understanding what's happening in their business and how they're preparing on the new business side. You know, if something is is a little more marginal or a little more leveraged, we may take a pass at the split second, but it's I wouldn't say it's it's significant in terms of

our origination volumes. Interesting to hear you say that, you know, it does matter whether or not this person has been a client in the past in terms of evaluating. But I am curious. I want to hear um your broad thoughts on what this sort of whip lash that we've seen across financial assets, not just in stocks, but in bonds and all corners of fixed income, what that has meant for M and A and for deals, Because anecdotally I don't have the numbers in front of me, it

feels like there's been quite a slowdown. Yeah, there has, and you know we have we continue to have a very very large, maybe record M and A pipeline. It's just not going to be executable right now, you know, if it requires financing of any kind of scale with

any kind of leverage. To think about the private equity arena. Um, there's been a real slowdown in terms of of P and E or PE oriented M and A. And then I think if you've got size and if you have to go out and raise you know, seven eight nine billion dollars as part of an M and A transaction, the markets are just not that deep right now, and that's away from buyers and sellers trying to figure out whether value still works at whatever in whatever conversations that

they've been having. So I think you need a valuation adjustment in certain areas of the economy and then there's going to be a wait and see in terms of what can be financed. Um particularly that's got some size to it. That was Don McCree, head of commercial banking at Citizens Financial Group, along with Bloomberg's Katie Greifeld and

Mike Regain. You're listening to Bloomberg Business Week. Coming up the story of the so called a lottery lawyer who stands accused of a massive fraud after spending years advising jackpot winners. A lot of lottery winners are not financially sophisticated in a blowing at all, feel like they've got to give it to friends or family or whatever, and so this guy takes advantage of this opening more in the alleged one million dollars scammer that's coming up. This

is Bloomberg. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim Stenovik from Bloomberg Radio. We've got one more story for you from the Bloomberg Business Week annual Heist issue. This next story features a New York area attorney who courted newly wealthy clients and allegedly built them out of tens of millions of dollars in

lottery winnings. Bloomberg Radio is Paul Sweeney and Bloomberg Markets correspondent Creedy Cooped caught up with a Business Week freelance reporter Simon van Zyland, would to help unravel the story of Jay Kurland. Let's soften it before we get into calling you a scam. Okay, is he is going on trial in about two weeks, so we have to say alleged with him, although he has some co conspirators who

I'll get into, who have all played guilty and so scammy. Indeed, this looks essentially The lottery lawyer is a guy named Jason Kurwin, and he cornered a niche market of the legal world by representing newly minted power Ball and Megan Millions winners. And so he show up on the Today's Show or all over the internet basically saying if you've won money and you're bewildered and you've no idea what to do with it. Called me, I'm your guy. And you know, as some of your listeners may know, a

lot of a lottery winners are not financially sophisticated. They end up blowing at all. I feel like they've got to give it to friends or family or whatever. And so this guy takes advantage of this opening. He has alleged to basically have squandered over a hundred million dollars from some of the bigger lottery winners in recent history on a variety of colorful schemes. And that's that's sort of the top line of it. So how did he

get caught here? Um? So that's a great question because there's these overlapping criminal schemes that, um that are at play here. So there was a I think that probably it's there's a Ponzi scheme involved, and so we don't really need to explain why the Ponzi schemes involved. Basically, a guy purporting to be a jeweler in Long Island was saying he could get massive returns on jeweler I think like the uncut gems Oudam Sandler movie, but like

in Long Island. He ends up getting pinched for with the Ponzi scheme, and that Ponzi scheme overlaps the water lawyer. That guy, the Ponzi scheme jeweler guy ends up becoming a confidential informant and starts wire tapping calls involved with a lottery lawyer, and that I think ends up toping some dominoes. Other people start flipping. There's wire taps up

the wazoo in this call in this case. Uh. And eventually they would let down and they figure out that the water lawer has been been losing money on behalf of the people that you're supposed to be managing, you know, their money and growing it, not you know, throwing it down the toilet. What are some of the quote unquote investment uh that these folks made on behalf of their clients.

Because it seems to me, I always say to myself when I see somebody on the TV screen holding up that big check for I would just buy treasuries and go to sleep. They do. So this is the irony. So these guys, they you know, varying levels of financialifuication. But so one of his big winners in the biggest single lottery winner of all time, meaning she won. She was a Long South Carolina woman who kept her identity private.

One point five billion dollars Jack Pott before tacks, and she said to him, please invest conservatively, and he was like surchure. Sure. Turns out that one of the bigger investment schemes was something called the Merchant Cash Advanced Business. He and somebodies in Long Island got into mc AS and what that is. It's it's almost like kind of gray area legal loan sharking, highly extracted loans, incredibly high

interest rates up too. It's for people with bad credit, deathper for cash, maybe they have criminal history, who knows, very popular kind of gray area of industry here in New York State. He decides this would be a great investment scheme. Uh. The guys he ends up partying with their total crooks, one of them one of whose grandfather was the head boss of the Colombo crime. Yeah, and

so that's maybe not the guy. I don't know if he googled him or not, but like, that might not be the guy you want to get in business with. And so that that money starts disappearing for a combination of reasons. One the grandson of the mob boss plus this other guy. Uh, they start kind of raiding the accounts, like, hey, we deserve a like we didn't win the lottery. One of these guys deserve all the money. So they start

rating it. Then they start investing what ends up being the Ponzi scheme, which so they lose all of it. And then this is a kicker to try to get the money back. They learn about another guy who actually is an alleged member of the New York City mob but for a different family, the Genevaise family, who says this is the beginning of the pandemic. Now he says, I've got something called Ppe and I'm gonna make a ton of money on it. And then that's the final

way that losing money. There's there's a lot of layers to this story. Clearly, let's add one more. Talk to us about Cheddar Capital. Yeah, so Cheddar Capital ridiculous name and if you google it, like you, this is the name of a business, Uh, you can't even find it. It's like there's that vanity fair website called Cheddar and then there's the cheese and it's like, is this even a real thing? Cheddar was one of the merchan cash advanced businesses that he was putting a lot of the

lottery winner's money in. And I think it's the beginning. It's possible that this was such an extractive and lucrative industry actually, um, that they were making a fair amount of money on it. Uh, it's just that it seemed to have been terribly mismanaged. Um so Cheddar. Once the Cheddar money started allegedly disappearing, UM that that toppled a bunch of other dominoes which led us down the road.

I was just telling you about. So Simon. There are four kind of main characters in your story here, but the lottery lawyer, and three of them have already pled guilty in their waiting sentencing. But the lottery lawyer himself, he's going to trial, right, give us a sense of the timing one once that can occur, how do you what's the expectation about how that might play out? The looks like um, at least a couple of co conspirators will testify against him. His own brother in law who's

a very careful, colorful character. He's a cosmetic surgeon in Long Island, uh called Scott Bleyer, who's handle on Instagram is dr b Fixen and definitely worth a look if you're on Instagram. He will be testifying apparently against his own brother in law and a whole separate aspect of this. So I would say this, between all the lawyers they talked to and people involved in the case, everyone is shocked at this guy. A lottery lawyers even going to trial.

He was fired from his law firm Riskin Rattler, which is based on Long Island, as soon as the allegations hit that the wire tops are incriminating. There's three gather guys who played guilty. Um, but his lawyer, I think he will. My guess is he's trying to clear his name because even if he if he takes a plea, I don't think he's worried. He's never gonna work again. And his whole reputation was based on integrity, right, I'm gonna help you manage your money. I'm the good guy,

and his record was alice until then. He seems like a family guy. He just seemed pretty milk past. I think he's going to Hell Mary to try to clear his name, and the lawyers, basically, I think are going to argue that he himself was scammed by his co conspirators that he invested money in a bench of that

bunch of bad schemes and it wasn't in fault. The problem is that he, unbeknownst to the allegedly unbeknownst to the winners, was taking a cut of the investment in terms of in like these things like Cheddar capital these businesses, and was allegedly spending it on you know, classic cliches like sac fIF avenue, uh an SUV like you name that kind of stuff, and so might be a tall hurdle for them to get an acquittal. That was Business Week freelance reporter Simon van zyland Wood talking with Paul

Sweeney of Bloomberg Surveillance and Markets correspondent Creedy Gupta. Still to come on Bloomberg business Week. New research on the changing landscape of E s G Why A recent survey showed impact investing to be more appealing to men and women and the E s G sector Americans are most concerned.

This is Bloomberg Broadcasting from the financial capital of the world, Bloomberg eleven Rio in New York to Washington, d C. Bloomberg to Boston, Bloomberg one of six one does San Francisco, Bloomberg nine six to the country, Sirius XM Channel one nine and around the globe, the Bloomberg Business and Bloomberg Radio dot Com. This is Bloomberg Business Week with Carol

Messer and Bloomberg Quick Takes Tim Stenovan on Bloomberg Radio. Well, well, CHILEI on Wall Street certainly in the first half of two Chile in my studio as well, and chilly when it comes to E s G because in May, investors made the biggest ever monthly redemptions from US Exchange traded e s G funds based on Bloomberg Intelligence estimates. So let's get to our guests see what she and her team are seeing. When it comes to impact investing in E s G. Sarah Bratton hughes his head of E

s G and Sustainable Investing in America's Century Investments. She joins us phone on the phone from New York City, American Century. By the way, they're controlling owner is the biomedical research Organizations Stower's Institute for Medical Research. The firm directs its profits to their efforts to defeat life threatening diseases. So uh, they're not only investing for others. They really are kind of walking the talk. Sarah. Nice to have

you here with Mike and myself. What interest are you seeing an E s G right now amid all the market volatility? Thank you for having me, Carroll. We are still seeing UM increased interest and E s G and sustainable investing. Although those headlines thought redemptions, Although the redemptions have gathered headlines, you can't really look at them in a vacuum. You have to look at them versus the

broader market as well. So UH, this year we conducted the FIT edition of our Impact Investing survey and there were some really interesting UH findings and there are all just talk about these three things that really surprised today. UM. Here in the US we've seen increased appeal of impact investing. But interestingly, it was probably the first or only survey I've ever seen that men had preferred impact investing over

a woman. And when you really killed back the onion and looked at the numbers, what you saw was actually there's a delta around what the education and impact investing is a woman, UH, particularly in the baby boomer generation. So as we think about the transfer of wealth, UM, people often talk about the intergenerational transfer of wealth, but I like to think of it first as an intergender

transformation of wealth. What we've also noticed is the dominance dominance of the S factors in the US, so UM consistently. UM US investors, when they're looking at the factors that they want to impact, consistently have had more appeal in S factors than our global counterparts. So what we observed this year again, healthcare is the most important factor from

a US perspective. Climate is up there second, but there isn't another E factor from a U S perspective, UM, whereas that is dominating, Climate dominates the UK, Germany and Australia. And then the third and final bit is on greenwashing, where over fifty of the investors were concerned about greenwashing. I would actually, Carol think that that number was higher

or bay within marketing. I would agree. I would agree because I really do feel like anything with the S G and impact, people are like, Okay, enough of it. We've seen a ton of money go into it. Now show me that you're really doing it. Mike, do you feel the same way. Yeah, Well, you know, Carol's sitting and Sarah, there's certainly been a bit of a backlash from the right side of the political aisle towards the

notion of the s G in general. Sarah, I'm wondering if you view that as any sort of legitimate risk going forward, especially no as these mid term elections come up and a lot of people expecting the Republicans to gain House and gain seats in Congress. Is there is this backlash? Uh, sort of in the early phases. But I wonder if is it a real risk to you?

Do you think, how are you thinking about it? So I look at what has really resulted in the rise of the SG investing, and it's um, the continued um demand we've seen from a both in a retail client perspective but also institutional clients. Um. It is the sort of economic argument for it when you've seen this massive rise of intangibles on balance sheets. If you look at the amount of intangibles on balance sheets in nineteen seventy five, the last figures were over twenty UM were over. But

I think the biggest thing is the policy environment. So according to the UN Principles for Responsible Investing, the top fifty out of the toxic economy have some form of policy design to help investors consider sustainability, risks, opportunities and outcomes UM. And for the longest time, the US was the outlier UM in terms of policies. We're providing kill wins for sustainable investing UM and now we may become

the outlier again. However, what we're seeing happening in the rest of the world, particularly Europe, is going to continue to provide kill win. That's Sarah Bratton Hughes, head of E s G and Sustainable Investing over at American Century Investments, along with me and Mike Reagan Bloomberg Markets. You're listening

to Bloomberg Business Week. Coming up travelers in the US and around the globe Europe for a summer vacation to remember, The CEO of Trovago explains what's hindering companies such as his from meeting our pent up demand to hit the beach. This is Bloomberg. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. A recent survey from travel services company Trovago found that

four and five consumers expect two will be their best summer. Yeah, This is rising fuel prices, labor shortages and an abundance of flight cancelations snarl airports across the globe, already making summer travel complicated and really testing our patients and our pocketbooks. I don't know, Carol, I've had a better summer. This has been Yeah, I don't know. We're not part of that.

Servey Bloomberg New Senior Markets reporter Katie Greifeld and Bloomberg Market Senior editor Mike Reagan as Tree Vago CEO axcel Hea for why he thinks travelers are looking past the inconvenience for the prospect of excitement. It's a very interesting point in time, to be honest, because we are coming out of the pandemic and and everybody was looking very much forward to the summer travel. And you see actually

a very strong demand for summer. But on the other hand, you also can see that the experience is not good. Prices are very high. Um, you have you have, as you said, you have labor shortage everywhere, So the outlook is actually not that good. Yeah, excell, is there any sense of when things will get back to normal? Uh? You know, this has just been a really nasty summer. As Katie said, for delays and cancelations, is already light

at the end of the tunnel that you can see. Yeah, I mean it's it's it's not that easy to be honest, because I mean it's it's not only in the travel industry. I mean you've got labor shortages UM pretty much everywhere. And I mean, to me, the question really is how

do you get the world back into balance now? So so there is UM is a lot more demands than the kill what can be filled by by the current staff levels and by supply and UM, I think we'll probably see a slowdown in demand and have to see a slow end demand UM and over years, demand supply will meet each other. And so actually it's interesting. So

so Trivago has actual data points here. You have a study that found that any three percent of respondents believe that summer of two will be the best yet for travel and advant adventures. Sort of square that circle for us. How how does that uh sort of be a possibility amid some of the themes that we're talking about. Yes, so, so, I mean the in the pandemic, we have seen one

thing very very clearly. I mean, no, no matter how difficult the situation has been and no no matter how big the health warriors have been, UM, people want to travel in summer, and so they need to get a break, They need to break out of their daily routine. So and and that's that's what I think what you can see and in the survey that we've run that that coming out of the pandemic, we are all looking very

much forward to the summer UM. But the experience in the summer in many many places is actually not that good because the supply UM is not able to meet the demand. Plus obviously you have you have all these problems in the world which leading to too bad service

to two higher prices. And I mean for for us that UM that's actually interesting because we compare prices, you know, so so in a way higher prices and and a bigger discrepancy in different price levels is UM is for us good because we can provide more value to our users. You know, Axel, Katie and I are major market nerds if they didn't warrant so, so we often view every

story from sort of the market angle. And the big story this summer is the currency market weakness in the Euro it's almost trading dollar for dollar on parody against the dollar, and the dollar at multi year highs against many currencies. Is that affecting travel trends at all? You know, we're seeing more Americans visit Europe and fewer Europeans visit America this summer. I mean, you've got trans atlantic travel

up in both directions, um not not unexpectedly. So you can't really see that, at least in the numbers that that we have to can't really see that because you have this overall recovery of um of trans atlantic travel um that is just dominating the overall trend um. I think it it might be something that you that you potentially will see in the in the months to come, because you're right, I mean, it got a lot cheaper

for Americans to go to Europe. Have you seen any difference in how people are traveling post pandemic, whether that's with someone or you know, the type of trips that they're taking. Yeah, I mean, we we've got the usual suspect on top of the list. So in the US you've got Las Vegas, Orlando, New York City on the top five. So, um, we haven't seen that fundamental shift.

Asia is still um not back because Obviously the situation there is more difficult, but other than that, the behavior is much more normal compared to what we've seen last year in the year before. Actually, we're talking a little bit about where people are going. If I look at some of the data that you sent over Las Vegas favorite domestic destination, If I look down the list, it seems that there's a theme, and that theme is going

to the beach. Yeah, absolutely, I mean the But that's that's a very consistent to what we've seen in the last two years. Um, it's really breaking out of the of the city and and and going really form for summer occasion where you can relax, you know. Actual, I hear hot destinations, and I think price destinations, and I'm really a cheap skate at heart. So I'm curious. Are there any sort of off the beaten track destinations that people are going, any sort of bargain hidden gem getaways

that we should know about. Yeah, I mean the I mean this summer, actually it's there. There are there are no real bar games, to be honest, Um, but obviously you should avoid the top destinations So Vegas, New York, Orlando, or Panama City, beat cetera. They are they are pretty well booked. Um. So the best advice to get value for money is actually to be very flexible, to be honest, so um, to avoid air transportation, go by your own car and and then be flexible on the time when

you're going, and and also on the destination. Of course, if you take a car, you do have to pay for gas, but at least you know no one can cancel your car ride at least not Yeah, I don't have to deal with that, but uh, accel very aware that you're joining us from Germany. I've talked a lot about the US so far, but when you look outside of the United States States, I mean, where are people going? What makes the sort of the summer destination list there?

I mean, it obviously depends a bit by country, Um you I mean I have a similar trend the usual suspect so um majorca for for the Germans and the bread Dubai is very popular. So so really people were after the pandemic looking forward to go to their favorite beach destination. And and that's that's what you see pretty

much everywhere. Acts with all these flight cancelations, um, and all the turmoil that's causing, I wonder does it help to book way in advance or to your point, is it better to be flexible and almost planning your vacation at the last minute. Yeah. I mean the best advice is really too to control transportation, because that's the part

that you that it is very difficult. Um right now. Um, So, really driving is actually the best of the safest, And if you're driving to a destination, you should actually book in advance because there are a lot of destinations where just there's just nothing available anymore. M hm. That is so interesting. Yeah, and again coming off of just a ton of headlines about flight cancelations, flight delays, at least in the US, it's not I can't I don't know.

Can you drive to Mexico? I've never tried it. Let's do it. Let's just got to get through this show and then then we're Mike and I are going to research that. But so the summer travel season obviously in full swing, a little bit difficult, but people are still traveling. Let's push ahead and talk about autumn. Um. I mean, do you have any expectations for how that might go, any sense that you know, given some of the difficulties we've been talking about that making national headlines. Might people

just sort of hold off and wait for autumn? Yeah, so, I mean not our expectations, and I mean I'm not an economist, so so you might know better than me. But our expectation aation is that the overall economy economy has to slow down. Um. I mean we we are completely out of balance, and you have obviously very high inflation, intrograce arising, etcetera. So the disposal of the income of

many many people is coming under pressure. So what we expect is that that people will actually try to save money on their trips, which for us is I said earlier, is is actually a good thing. Um. And that that means that they travel more locally or more regionally um, and that they shop around more for the right accommodation. Well, this conversation gets me thinking about you know, business travel for example, Um, I mean, what are what are you seeing? There?

Is business travel ever going to return to pre pandemic levels or sort of like you know, the office environment itself with some shifting to hybrid work. I mean, is the business travel landscape sort of fundamentally changed here? I do think? So, I think, I mean this, this is actually different and I mean if we go back to two thousand eight nine and to two thousand one two, I mean we had the same discussions business travel will

not come back, etcetera. I think now there is one very fundamental change, which is that even not traveling, I mean in our core job, we accept that you can actually work remotely and you can do you know, project updates, etcetera. Remotely and we do that every week. And so that that actually learning will lead to lower necessity for business travel. And the way we are thinking about it, you have

basically two kinds of business travel. One is more relationships sales focused, where you need to meet in person because building relationship virtually is very difficult. The other one is more transactional. I mean you you discuss the deal, you give a project update, etcetera. Which is a lot of intra company travel, and that will not come back to

pre pandemic levels. And a big thanks to Travago CEO AXL he for for joining our broadcast and also to our colleagues here at Bloomberg News you filled in for both him and throughout the past week or so Katie gray Feld, Mike Regan, Kregopt and Paul Sweeney. They are the best. We appreciate their assist and expertise in really

guiding our ship this past week. Also got to thank our producers Ri Lagami, Paul Brennan, and Carl Wanna, who juggled a lot while we were out, oftentimes with just minutes to find that we weren't available, so really appreciate them heading up the ship. This week really takes a village. I'm the village idiot and at COVID Free Village. All right, that wraps up, You're no idiot. That wraps up the weekend edition of Bloomberg Business Week from Bloomberg Radio. Thanks

so much for joining us. I'm Carol Masser. Be sure to tune into Bloomberg Business Week Monday through Friday starting at two pm Wall Street Time on Bloomberg Radio. You can also watch our daily broadcast on YouTube. Just search Bloomberg Global News, and be sure to check out our Bloomberg Business Week podcast. Find that at Bloomberg dot com, Apple, or wherever you get your podcast. Bloomberg Business Week is available on newsstands now, at Bloomberg dot com and on

the Bloomberg Terminal. I'm Tim Stutter and I'm Carol Masser. Have a healthy and safe week, and everyone this is Bloomberg.