Artificial but not so intelligent

After months of mainstream chatter around the technology, the Financial Times this week offered up “the sceptical case on generative AI.”

In the article, innovation editor John Thornhill argues that “even by the breathless standards of previous technology hype cycles, the generative artificial intelligence enthusiasts have been hyperventilating hard.”

With the world’s biggest companies such as Microsoft and Google parent Alphabet throwing their weight behind the technology and declaring “that AI is the new electricity or fire,” “never knowingly outhyped” venture capitalists are also throwing their cash in pursuit of use cases for the emergent technology.

“Fifty of the most promising generative AI start-ups, identified by CB Insights, have raised more than $19bn in funding since 2019,” Thornhill writes. “Of these, 11 now count as unicorns with valuations above $1bn.”

Add to that predictions like those from McKinsey, which suggests AI will add between $2.6tn and $4.4tn of economic value annually, and it’s clear why the technology has begun to take over the world.

“But what if they are wrong?” Thornhill asks. Technologist Gary Marcus has already suggested the market may see a “massive, gut-wrenching correction” in valuations, “as investors realise generative AI does not work very well and lacks killer business applications.”

Marcus is co-founder of the Center for the Advancement of Trustworthy AI, and has long been a skeptic around the real “intelligence” of AI models.

He points to large language models’ propensity to “hallucinate”, that is to say, make things up, as one of their key drawbacks currently being ignored by the investors so keen to make the technology work.

While engineers work to correct them, Marcus suggests these hallucinations will remain a part of generative AI models and be unfixable using the current technology.

“There is a fantasy that if you add more data it will work,” he told Thornhill. “But you cannot succeed in crushing the problem with data.”

Thornhill also details how training future AI models on now polluted data sets (containing inaccurate information due to the meddling of current models) will lead to a greater incidence of hallucination and contribute to the “enshittification” of the internet.

Still, Marcus sets out a number of the real-world use cases for AI, even in spite of its less-than-perfect accuracy.

Whether those uses are enough to drive profits for investors – or whether the AI market is a bubble soon to burst – remains to be seen.

Would you bet on ESPN?

Legal Sports Report (LSR) this week brought us its analysis on Penn Entertainment’s decision to ditch Barstool Sports in favour of ESPN.

The agreement to launch ESPN Bet, LSR said, represents “the most coveted branding partnership in US sports betting.”

However, the deal will not be all sunshine and roses, as Penn now occupies the unenviable position of building a customer base for an entirely new betting brand in an extremely competitive market dominated by just a few giants.

The article harks back to The Stars Group’s deal with Fox Sports a few years ago, with a helpful reminder that “it did not work.”

The same fate, it argues, awaited other media brands attempting to enter the betting sector, including Yahoo, Sports Illustrated, Maxim and Fubo.

Not to mention, it added, Penn has already attempted some variation of the same strategy with its Barstool Sportsbook.

“Even as the best performer of this group, Barstool Sportsbook’s national share is languishing in the low single digits in every market it serves. Its overall slice of revenue across its 16 active states is less than 5% and trending down as it prepares to join the graveyard of US sports betting brands.”

That reality makes it “pretty easy to make the case for why ESPN Bet will not succeed,” LSR suggests.

On the flipside, though, many argue that the current US betting market dynamics are not fixed “and perhaps even ripe for serious disruption.”

As the number one sports media brand in the country, boasting more than 100 million monthly unique visitors and 25 million subscribers to its ESPN+ product, “if there is any brand that can do it right now, it is ESPN,” the piece suggests.

The brand’s potential to become a betting behemoth largely depends on ESPN’s willingness to engage with the sector, the article adds, as well as the ever-important matter of product quality.

Penn has already said it does not expect ESPN Bet to turn a profit over the next 12-18 months, so there is a long way to go before the partnership has a chance to bare fruit.

Still, this deal probably has a greater potential to shake up the US sector than any other we have seen this year.

Research funders Down Under

Over to Australia now, as The Guardian expressed its concerns this week about a new research centre at the University of Sydney.

The Centre of Excellence in Gambling Research was launched this week at the world-leading university, but is funded with hundreds of thousands of dollars provided by stakeholders in the gambling industry itself.

Funding was provided by the International Center for Responsible Gambling (an American nonprofit group that funds scientific research on gambling addiction and is itself bankrolled by a veritable who’s who of American gambling firms), together with Flutter-owned Sportsbet, and Entain.

While the university “has been upfront about its links to the gambling industry,” and insisted that gambling firms would not be given the opportunity to “constrain or edit the research in any way,” many have expressed concerns about the industry’s involvement.

The relationship between gambling firms and the university is “troubling in part because it normalises the relationship with research institutions and the gambling industry,” said one commentator.

Another suggested that “For [gambling companies] to bolster and window-dress their social licence by trumpeting the Sydney university association hurts all Australians.”

Meanwhile, the head of the new research centre, Professor Sally Gainsbury, said: “This partnership is unprecedented and will allow us to translate research findings into effective real world, evidence-informed strategies to prevent and reduce gambling-related harms.

“Having access to major gambling operators is essential as it means we can conduct live trials and test the efficacy of interventions designed to encourage positive behavioural change.”

Indeed, as well as providing the funding for the research, the gambling firms involved will also supply the centre with de-indentified data on gambling behaviours, allowing researchers to better understand the impact of various interventions.

“This is a significant development in gambling research,” Gainsbury concluded.

While concerns around the origins of funding may be justified, perhaps it is only fair that the sector pays its way with regards to research into gambling behaviours.

Companies could surely be accused of not doing enough had they not supplied the funding, so this could well be a classic case of “damned if you do, damned if you don’t.”

The Dark Side

The Financial Times this week published an investigation into “the dark side of the US sports betting boom”.

The article is packed with rich data on the sector’s growth since the repeal of PASPA in 2018, and details how the US betting sector has transformed at breakneck speed.

While prior to 2018 punters would need to go to one of a select few physical locations to place bets on sports, today the vertical is readily available to the majority of the US population.

While that spells good news for companies in the sector and state budgets alike, the proliferation of sports betting across the US has also brought about its fair share of drawbacks.

The article tells the story of Dylan, for example, a 22-year old trainee lawyer whose gambling habit started with a $5 promo deal on DraftKings.

After winning $300 on the promotion and quadrupling those winnings playing online blackjack, “he was hooked,” the article says.

Dylan soon found himself maxing out four credit cards to fund increasingly risky bets, sometimes wagering as much as $5,000, “on everything from obscure tennis fixtures in China to Venezuelan women’s volleyball matches.”

Dylan eventually came clean to his family about his gambling habit, which saw him borrow and stake more than $50,000 over the course of a year.

The FT, in turn, used the case to illustrate the inherent risks of the rapidly growing online gambling industry in the US.

Since PASPA was overturned in 2018, Americans have wagered some $245bn on sports, the piece says, as problem gambling statistics have quickly become more and more alarming.

A New Jersey survey showed, for example, that 6% of the state’s residents were problem gamblers and as many as 20% exhibited signs of problematic play.

In Pennsylvania, meanwhile, 36.7% of online bettors surveyed admitted to observing at least one problematic element to their gambling last year.

The solution to problems like these is far from simple, but the piece does offer up a range of different insights into how to tackle the issue.

Readers are encouraged to view the full article, which has been widely shared among industry stakeholders this week.

What a trip

Sticking with the theme of problem gambling but now turning our focus to treatment, The Mirror this week put out a report on an upcoming world-first in the UK.

A team of British scientists is currently preparing to run a clinical trial using psilocybin – the psychoactive chemical found in magic mushrooms – to tream gambling addiction.

The government-funded study is set to offer the drug to patients from October, with a view to developing a new kind of addiction treatment that could later be made available through the Naitonal Health Service.

Among the top neuropharamacologists who make up the team of scientists is David Nutt, a former so-called ‘drug tsar’ in the UK, who previously courted controversy with claims such as that horse riding is a significantly more dangerous ‘addiction’ than the use of ecstasy.

“Nobody with a gambling addiction has ever been dosed with psychedelic therapy in a clinical trial so it really is quite a pioneering move,” said Rayyan Zafar, another scientist who is leading the new study.

“We’re super excited. We’ve been wanting to do this work for quite a while,” he added.

In the trial’s early stages, work will focus on just five initial patients, before being rolled out to others after the first set of tests.

Psilocybin has previously been used for the treatment of addictions such as tobacco and drugs, and has been proven to help patients, The Mirror said.

Neurologically, gambling addiction works in a similar way to substance addiction, Zafar said, explaining why psychedelic therapy may have a similar positive impact for those affected.

“Historically with psychedelic research in the UK there’s been very little institutional or government-backed funding so [the trial] is a really positive sign,” Zafar added. 

“Maybe it’s a sign times are changing. It’s becoming more of a priority area and it’s no longer a fringe science.”

Settle down

Now to the Racing Post, which this week featured an article on UK gambling regulation from Dan Waugh of Regulus Partners.

In it, Waugh argues that the Gambling Commission “needs to sort out [the] voluntary settlements mess” currently taking place in the UK.

The regulator “recently appears to have developed a phobia against enforcing its own rules, at least where the use of so-called ‘voluntary settlements’ are concerned,” he writes.

Voluntary settlements are paid by gambling firms in lieu of financial penalties, Waugh explains, with the proceeds being used to support gambling harm prevention initiatives.

One such initative attracted Waugh’s ire, however, as he pointed to a “mathematically illiterate” report, funded by Gambling commission settlements, produced by the National Institute of Economic and Social Research (NIESR) and based on what he calls “methodological balderdash.”

While funds secured through Gambling Commission settlements should not be used for political or lobbying efforts, he adds, the report “appears to be a thoroughly political project, aimed at persuading the government to adopt restrictionist policies as part of its Gambling Act review,” Waugh says.

“If this is the case then it is in breach of the rules concerning the use of voluntary settlement funds.”

Worst of all, Waugh points out, “although rules appear to have been broken, there is absolutely no recourse to sanction and no mechanism for retrieving the misspent funds.”

In similar fashion, several “overtly anti-gambling projects” also appear to have received public money and approval from the Gambling Commission to carry out their work, he said.

“The system of voluntary settlements is a mess – with funds that could be used to support those with a gambling disorder diverted to anti-gambling activism,” Waugh concludes. 

“The mess is not entirely the commission’s fault but the absence of any acknowledgement that an issue even exists is troubling.”

Tell us what you really think

Much criticism has been proffered in the direction of the cryptocurrency world this year, though few have produced a takedown as scathing as Financial Times columnist Jemima Kelly.

Having spent years calling out “the steaming pile of horse manure that is crypto”, Kelly suggested in her FT column this week that 2022 has shown the sector to be even more corrupt and dangerous than she previously thought.

“In many ways, I have been shocked myself at what has happened in the world of crypto over the past year,” Kelly wrote. “It has proved itself more shameless, dishonest, interconnected and fantasy-based than even its strongest critics could have imagined.”

Kelly goes on to list a handful of things we’ve learnt from the world of crypto this year, including the fact that the ecosystem has been propped up by a lot more leverage than many realised. 

“And this was borrowing in real money, not just the magical strings of 1s and 0s that crypto tokens consist of,” Kelly pointed out.

The result of that was widespread chaos and collapse amid rising interest rates this year, leaving crypto prices tanking and platforms such as Celsius and Voyager failing to hold it together.

The past 12 months have also taught us that the world of cryptocurrency isn’t nearly as decentralised as its biggest supporters would have you believe.

“2022 was the year that we found out the extent to which Big Crypto is a real thing: a cartel of interconnected players from exchanges, stablecoin companies and crypto networks who work together via group chats – one Signal chat was reportedly called “exchange co-ordination” and included executives from FTX, Binance and Tether,” Kelly said.

Kelly then pointed out the ‘smoke and mirrors’ effect of the crypto world in recent years.

Martin Walker of the Center For Evidence-Based Management, a longtime crypto critic, told her, the books of crypto exchanges “are filled with their and their friends’ nonsense tokens”, and that when one of these implodes, “whole chunks of industry can very rapidly disappear”.

In spite of all the criticism – of which there has been plenty this year – the biggest takeaway for Kelly was ultimately the sector’s resilience.

Regardless of collapsing exchanges and the falling value of the tokens themselves, “many people are still willing to suspend disbelief, clinging on to the hope that one day, their miraculous internet money might resume its trajectory to the moon.”

Crypto investors will no doubt be hoping for their coins to lift off once again in 2023. Will Kelly be left with egg on her face? 

Going on a bear hunt

According to a new Reuters article, investors in US stocks and shares are currently bracing themselves for an expected recession in 2023.

With just a few trading days left in 2022, the benchmark S&P 500 index is down 19.8% year-to-date and headed for its biggest annual decline since 2008, the article said.

That is largely the result of aggressive monetary policy adopted by the Federal Reserve this year, in an attempt to curb the impact of rapidly rising inflation.

While inflation continues to run rampant, investors are now shifting their focus to the potential consequence of recent Fed rate hikes; the prospect of an economic slowdown in 2023.

Fund managers responding to a survey by BofA Global Research named a deep global recession and persistently high inflation as the biggest risks in the market for next year, with a net 68% forecasting a downturn as ‘likely’ in the next 12 months.

“The consensus is pretty clear that there is going to be a recession in 2023,” said Chuck Carlson, CEO of Horizon Investment Services. “The issue is how much has the market already discounted a recession, and that’s where it gets a little bit thornier.”

Ed Clissold, chief US strategist at Ned Davis Research, added: “If we’re not in a recession now but we’re going into one that would mean that a retest of the October [share price] lows and a break of them is quite possible in the first half of the year.”

Investors are also now working to gauge the degree to which slowing growth has already been factored into corporate earnings.

Consensus analyst estimates suggest a 5% rise in S&P 500 earnings next year, according to Reuters, with at least slim year-over-year growth expected in every quarter.

Earnings fall by an average annual rate of 24% during a recession, however, meaning there is still plenty of risk under current market conditions.

In spite of this, strategists polled by Reuters last month said they expected the S&P 500 to end 2023 around 10% ahead of current levels.

“One way that could happen is if a recession hits early in 2023 and ends quickly. Bear markets on average have bottomed four months before the end of a recession,” the article said.

If there is a bear market on the horizon, the global economy will at least be hoping that it isn’t too grizzly.

Time to take over Twitter

Self-appointed Saviour of the World Elon Musk hit the headlines again this week – or more accurately, continued to hit the headlines – as he performed what was likely considered by his critics to be his biggest and most public self-own.

After asking Twitter users if he should stand down as head of the social media giant following his acquisition of the platform earlier this year (and promising to abide by the results of the poll), 57.5% of respondents suggested Musk should be relieved of his Twitterly duties.

After the poll closed, Musk promised users on the site: “I will resign as CEO as soon as I find someone foolish enough to take the job! After that, I will just run the software & servers teams.”

BBC News pointed to several possible causes for Twitter users turning against the mogul – though this will come as no surprise to regular users of the platform, who have seen no shortage of criticism aimed at the South African-born space explorer in recent weeks.

I will resign as CEO as soon as I find someone foolish enough to take the job! After that, I will just run the software & servers teams.

— Elon Musk (@elonmusk) December 21, 2022

From charging users for Twitter’s ubiquitous blue ticks to removing journalists from the platform, the court of public opinion has brought a litany of charges against Musk since he took control of the site.

Even the United Nations and European Union got in on the action, with the UN tweeting that media freedom was “not a toy” and the EU threatening Twitter with sanctions.

One thing which could cool off criticism of the platform is the prospect of new management. After the poll closed, however, Musk responded saying that “No one wants the job who can actually keep Twitter alive. There is no successor.”

Indeed, BBC News agreed with his assessment that a replacement will not be easy to come by.

Some have speculated that Twitter’s co-founder and erstwhile CEO Jack Dorsey could re-enter the fray, while other names, such as former Facebook COO Sheryl Sandberg, engineer Sriram Krishnan and Donald Trump’s son-in-law Jared Kushner have been mentioned. Heaven forbid. 

At first glance, this does not appear to be a list completely free from the possibility of creating further controversy.

Musk will soon need to find time to focus on his role as Tesla CEO, however, as investors in the car manufacturer appear to be losing patience with the uncertainty created by his foray into the world of social media.

Shares in Tesla have tanked by some 69% this year-to-date, a number which is likely to amuse ‘edgelord’ Musk. His investors won’t be laughing, however. As for the value of Twitter at this point, that’s anybody’s guess.

A new Gambling Act at last?

Since the UK’s new government, led by prime minister Liz Truss, came into office last month, the gambling industry’s call for answers on a review of the 2005 Gambling Act have been met with little more than radio silence.

According to a report this week in the Racing Post, however, a review may well still be on the cards, according to former Conservative party leader and long standing campaigner for gambling reform Iain Duncan Smith.

According to the article, Smith told a meeting at the party’s conference in Birmingham on Tuesday that there had been little change from the situation under Boris Johnson’s regime with regards to the Gambling Act.

The government first launched its review of the act in December 2020, with a promise to bring forward new legislation “fit for the digital age”.

However after repeated delays, the most significant of which took place as outgoing PM Johnson announced his resignation earlier this year, the industry has been left wondering whether a review will be forthcoming at all.

Smith told the meeting that it is “not altogether certain where the government is right now” following Truss’ ascension to the UK’s highest office, however he added that former gambling minister Chris Philp, now chief secretary to the Treasury, was still keen to move forward with reforms.

Smith remains optimistic that the white paper will still be published, according to the article, but added that “it’s going to be one of those things where the government will have to balance the time they have for doing it and whether or not they’re driven to do it for the right reasons, and that’s really a game of persuasion I guess.

“It’s in exactly the same place as it was before. The problem is that names have all changed and people who therefore knew something about it are no longer in the posts that they were, so that’s the problem,” he added.

While the new government continues to find its feet and establish its priorities, it appears there is still little comfort for an industry which still doesn’t know for sure which way the wind is blowing.

Legalised sports betting? California’s dreaming

Both of California’s sports betting ballot measures are “underwater” despite the near half-billion dollars spent in supporting them, according to California-focused political newsroom CalMatters.

The ballot campaigns, which are now by far the most expensive political campaigns ever seen in the state, are widely accepted to be heading for disaster when state residents are invited to vote on them next month.

With election day just five weeks away, support for Proposition 27 – which would see mobile wagering introduced allowing commercial operators like DraftKings and FanDuel to enter the market – sits at just 27%, with 53% of voters opposed to the measure and 20% undecided.

Proposition 26 – which would allow for in-person wagering on tribal gambling properties – isn’t faring much better, with support of just 31%, with 42% of voters opposed and 27% undecided.

And there is not much time left to change voters’ minds – county election offices are required to begin mailing ballots to all active, registered voters no later than Monday.

According to CalMatters, the campaigns have not been helped by the fact that many of the ads surrounding the issue have been considered confusing or even misleading, and that they are funded by four separate ballot measure campaigns featuring a “complex cast of players”.

Each proposition has attracted separate campaigns both for and against, making for a cutthroat and hard-fought competition which, it now seems, has been battled for months entirely in vain.

Twitter takeover intensifies

Elon Musk’s Twitter takeover saga continues, as the social media giant has agreed to delay a deposition by Musk originally scheduled for yesterday (6 October), as the two sides continue to hash out a way of closing his $44bn buyout of the social network, according to the Financial Times.

After saying he would buy the company in April and subsequently trying to back out of the deal, Musk this week sent a letter informing Twitter he was willing to close the deal at the originally agreed $54.20 per share price in exchange for halting the litigation to determine whether he can walk away from the deal.

A trial to determine that is scheduled to begin on 17 October in a Delaware court.

Negotiations over how to close the deal have hit problems over concerns that Musk could still sabotage a $13bn debt financing agreement he has arranged, while the FT said that according to one person inside Twitter there remains far less concern about the banks themselves being reluctant to meet their debt commitment contract.

An agreement would put an end to weeks of legal to-ing and fro-ing, during which each side has accused the other of being uncooperative and deliberately hiding information.

On Wednesday, the judge overseeing the case in Delaware Court of Chancery, Kathaleen McCormick, wrote: “The parties have not filed a stipulation to stay this action, nor has any party moved for a stay. I, therefore, continue to press on toward our trial set to begin on October 17.”

The article added that legal analysts have suggested Musk’s change of heart was an acknowledgement of weaknesses in his case in which he alleged that Twitter had misled regulators and investors by underestimating the number of fake accounts on its platform.

He also accused the company of failing to disclose cyber security failures, an issue later added to the complaint following similar allegations by a former Twitter executive-turned-whistleblower.

Twitter snapped back at those allegations, saying it was Musk who had breached his obligations in the merger agreement by repeatedly disparaging the company and its executives, while failing to move to complete the deal.

Whatever happens next, there is no question this has been the most overly dramatic M&A story of the year.

Going overboard on the underdog

ESPN published a story this week on a wager which recently sent the sports betting Twittersphere into a virtual meltdown.

The story begins with a New Jersey restaurant owner and a former Goldman Sachs trader talking bets at a Russian-style bathhouse.

According to the article, hungover restaurateur Robert Doran was waxing lyrical to bathhouse owner and former financial trader Pete Kizenko about a bet tip he’d received the night before.

Doran told Kizenko that a number of former Michigan athletes had been at the wedding he attended the previous night, and were talking up a team from the Mountain West as a sleeper for the next college football season.

Kizenko, a betting enthusiast and no stranger to taking the longshot, didn’t hesitate. After checking the odds on a tournament victory for the Utah State Aggies (who ranked 24th in the final Associated Press top 25 rankings in 2021), he said: “F— it! Let’s hammer the national championship. They’re 1,000/1.”

While placing bets on wide outsiders is nothing new in the betting world, Kizenko’s $1,000 stake – worth a million-dollar payout if the bet comes in – left the Caesars Sportsbook team scratching their heads.

According to the article, several veteran bookmakers struggled to recall ever taking a four-figure bet on a team with 1,000/1 odds or longer. 

Adam Pullen, who has been taking bets in Las Vegas for 30 years told ESPN that wagers on 1,000/1 long shots are typically in the $5-$20 range or “the $100 variety at most,” nowhere close to the $1,000 Kizenko dropped on Utah State.

After tweets showing the bet went somewhat viral on Twitter, other punters wanted to get in on the action and Caesars found itself taking another $1,000 bet on the Utah underdog within a few days, and as of mid-July, the Aggies had attracted more national championship bets of $1,000 or more at Caesars than any other team, except Alabama and Ohio State, the two consensus favorites.

Doran clearly liked the idea that his tip had contributed to messing with the bookies’ heads. “It’s funny, because you had everybody thinking that these smart people are doing crazy research on Utah State and that it’s some like hidden Messiah golden pick,” he said. 

“And really, it just came from me ripping tequila shots with some players at a wedding.”

While the odds remain slim, one thing’s for sure; if Kizenko’s bet comes in, Doran can be sure there’s a lot more tequila where that came from.

All hail the meme stock king

Speaking of outlandish bets, the Financial Times this week shared the story behind Jake Freeman, the 20-year-old student who was able to amass a $110m fortune by investing in beleaguered US retailer Bed Bath and Beyond.

Shares in the bed and bathroom specialist have tanked from a 52-week high of $34.61 to as little as $4.39 this year, making it a prime target to become a so-called ‘meme stock’ – a term used for stocks whose prices are inflated by an online community of aggressive retail investors looking to extract as much value as they can from the market (remember GameStop, anyone?)

The hordes of investors jumping in on these shares cause massive volatility, allowing the savviest investors to make huge returns in short spaces of time.

Jake Freeman recently offloaded a 6% stake in Bed Bath and Beyond at a price of around $27 per share. He bought those shares a few weeks earlier for under $5.50.

This almost 5x return generated an extraordinary $110m fortune from the young investor, who as it turns out had been furnished with $27m of capital to invest – hardly a rags-to-riches story, then.

Speaking to the FT, Freeman declined to disclose the names of his investors, citing confidentiality agreements, but said he had tapped friends, family and other people in his orbit.

As it turns out, Freeman is something of a mathematics whizz, and is no stranger to the world of investment having interned at New Jersey-based Volaris Capital Management under the mentorship of its founder Vivek Kapoor – who, by the way, said he was not involved in the Bed Bath trade.

The now set-for-life young man had been trading alongside his uncle Scott since the age of 13, apparently, and had what he described as “substantial” support from his parents.

After researching ailing retailers to identify his next big opportunity earlier this year, Freeman had settled on Bed Bath and Beyond and was surprised to see prices begin to surge once again in August.

“[People] were really hyping it up on [Reddit discussion board] WallStreetBets, which just led to more and more fear of missing out,” he said.

And he got the timing just right. The day after he liquidated his 6% stake, the value of shares plunged from $27 and are now worth less than $11 each.

Once again, the market is reminded: never underestimate the power of a determined online community.

Investors themselves, however, should also be reminded: try to avoid getting caught up in online FOMO. When it comes to meme stocks, what goes up must come down.

Search continues for BitConnect co-founder

From bets on criminally long odds, to actual criminal activity, this week Coingeek reported on an investigation taking place in India against the co-founder of cryptocurrency Ponzi scheme BitConnect.

Police in the Indian city of Pune have launched an investigation against Satish Kumbhani, who is now wanted in the country following a complaint from an investor about a missing BTC investment.

According to a report by local news outlet the Indian Express, the investor said he lost nearly 220 bitcoins (more than $5m) through several investment platforms operated by Kumbhani and six others between 2016 and 2021. This amount includes his initial investment of 54 bitcoins and reinvestment of 166 bitcoins earned as returns.

Authorities have been unable to local Kumbhani since he was indicted by the SEC for charges relating to his BitConnect activities, which ceased in 2018.

According to US authorities, the platform fraudulently raised $2.4bn by misleading investors. In February this year, Kumbhani was indicted by the Department of Justice on charges of wire fraud, conspiracy to commit commodity price manipulation, and international money laundering.

According to Coingeek, he will face up to 70 years of jail time if found guilty of all the charges.

While the old saying goes “if you have nothing to hide, you have nothing to fear,” it seems Kumbhani now has plenty of motives to do both.

Kindred in court

This week, Swedish newspaper Expressen revealed that a famous former customer has filed a lawsuit against Unibet owner Kindred, with a view to suing the firm for SEK10.3m (€1.0m).

Self-described gambling addict Per Holknekt, who is also a Swedish fashion designer and media entrepreneur, gambled away as much as SEK26m over 15 years, and claims that he was “seduced into a viciously dependent position towards the gambling companies.”

After announcing that he would be filing a lawsuit against Kindred in 2020, this week the suit was sent to the Stockholm District Court.

“The gambling company has deliberately ignored the player’s gambling addiction and through constant incentives worsened his financial situation,” the lawsuit claims.

Kindred told Expressen it had noted the lawsuit, but declined to comment further.

Calling all crypto bros

An interview in the Financial Times shed a light on the difficulties of regulating cryptocurrency, as it revealed the chair of the European Banking Authority (EBA) holds major concerns over the regulator’s ability to govern the industry.

The EBA is set to introduce new regulations around digital currencies by 2025, although it appears that several obstacles still stand in its way.

According to the article, the Authority’s ability to hire specialised staff is a “major concern,” while chair José Manuel Campa said the organisation was also worried about the logistics of planning for its new powers, as it will not find out which currencies fall under the regulation until very soon before its introduction.

The intention is that the EBA will supervise “significant” tokens that are widely used as means of payment, as well as stablecoins, which are popular tokens linked to traditional assets.

According to the FT, banks, fintechs and consultancies are making the EBA’s life difficult by snapping up specialist talent while offering “lavish” packages to attract the top performers to work with them.

This does no favours for the regulator, which offers compensation packages in line with those of the European Commission. Campa said that giving the regulator more freedom to determine pay packets – and thus help it attract the talent it requires – is “not within the range of possible discussions.”

Meta chases its losses

Investors in Meta will be celebrating this week after the social media giant revealed it had managed to reduce the quarterly loss of its Facebook Reality Labs (FRL) division from a whopping $2.96bn in Q1 to a frankly insignificant $2.81bn in Q2.

The Crypto Times reported that FRL generated $452m in revenue during Q2, a tiny portion of Meta’s total $28.4bn in quarterly turnover.

According to the author, Meta previously estimated the FRL division would reduce its net profit by around $10bn in 2021, with the company suggesting it was ready to spend even more on the division in the coming years.

Back in 2001, Microsoft sold the Xbox at a loss so it could break into gaming and beat Sony and Nintendo. It lost around $125 on every console sold. It sold 24 million. Bill Gates also added more memory to the machine to make developers like Tim Sweeney happy.

— Dean Takahashi (@deantak) July 29, 2022

Reality Labs is Meta’s research and development division for virtual and augmented reality, and the owner of the Oculus Quest VR headset. The firm currently operates 12 Reality Labs research facilities around the world.

Meta’s latest financial report showed it had suffered its first year-on-year revenue decline in its history, after a fall in advertising sales saw total revenue slip by 1%.