Law

SBF’s punishment has finally come

The fallen crypto mogul, SBF, has just been sentenced to more than two decades in prison. On Thursday, a US district judge sentenced Sam Bankman-Fried, the former cryptocurrency tycoon, to 25 years in prison. Prosecutors had asked for 40 to 50 years, while SBF’s lawyers argued for six.

In case you need a refresher…

Sam Bankman-Fried was the CEO of one of the largest digital currency exchange platforms for buying and selling cryptocurrencies, FTX. FTX quickly rose to dominate its market by buying up struggling competitors, such as Liquid Global, LedgerX and Blockfolio.

• FTX also used aggressive marketing campaigns, such as Super Bowl ads, celebrity endorsements (like Tom Brady and Steph Curry) and naming rights to the Miami Heat's arena.

• These marketing campaigns promised that people could put their money in these accounts and earn higher yields than the average bank.

At the same time FTX rose to prominence, cryptocurrency was booming (with Bitcoin peaking at $64,000), leading to venture capital groups investing nearly $2 billion in FTX.

FTX crumbled as quickly as it boomed: About a year later, CoinDesk published an article stating that Alameda Research (also founded by SBF) borrowed as much funds from FTX as it wanted. It was later found that this funding was mostly from customers, and the trading firm would consistently borrow money from FTX customer assets.

• Bankman-Fried also used FTX funds to buy personal luxury items, finance advertising campaigns and make political donations (see list here).

In only 10 days, FTX collapsed. Customers withdrew all of their funds, leaving FTX in a multi-billion dollar deficit. When the company couldn’t pay customers what they were owed, it declared bankruptcy, essentially burning $10 billion in customer assets.

So, what now?

The 32-year-old MIT graduate was found guilty in November on seven counts of fraud, conspiracy, and money laundering and has been ordered to repay over $11 billion in missing customer deposits. SBF had faced a maximum sentence of 110 years, although he was only sentenced to 25.

• If he serves his full sentence, Bankman-Fried will be 57 when he gets out, but experts have said he’s unlikely to serve the whole time.

Meanwhile, a group of former FTX investors filed class-action lawsuits against the law firm that represented FTX in its bankruptcy proceedings and celebrities who promoted the failed exchange.

Bankman-Fried plans to appeal his conviction and his sentence.

Economy

Americans are splurging like there’s no tomorrow

For whatever reason, Americans seemingly can’t stop splurging on life’s pleasures. Consumer spending, an indicator that highlights the economy’s resilience, shot up 0.8% last month (more than it has in over a year), according to a government inflation report released Friday.

What are they spending money on?

Much of the jump can be attributed to the consumption of services like concerts, plane tickets for vacations, and other pleasure purchases; or what The Washington Post is calling “YOLOing.”

• Foreign travel spending grew almost 30% last year, and live events purchases went up by 27%, according to the Bureau of Economic Analysis.

• It also carried into this year… there were 9% more travelers on March 25 than a year ago, said the Transportation Security Administration.

Economists said higher wages and Americans’ bolstered savings accounts attributed to the lavish money practices Americans have developed in the post-pandemic economy in the past few years.

The other side of the coin

While consumer spending runs rampant, people are saving much less of their income since late 2022, and their savings from the pandemic are dwindling. Meanwhile, Americans have also been borrowing more since 2021, using credit cards and buy now, pay later services… even with dizzying interest rates providing an incentive to do the opposite.

However, Americans are cutting down on some of their fun: Consumers are practicing some form of discretionary spending at least. Compared to the previous year, people are spending 5% less on eating out, per OpenTable data analyzed by the Wall Street Journal.

• Plus, retail sales grew more slowly than experts expected last month.

To flip the coin again, consumers’ willingness to spend lavishly has some analysts bullish on economic growth this quarter.

California burgers will be more expensive than ever

Fast food employees in California can rejoice, because they’re getting a big pay bump. A vastly criticized law took effect in California yesterday, raising the minimum wage for most fast-food workers in the state to $20 per hour, a 25% increase over the previous $16 minimum wage.

• The law applies to fast-food companies with at least 60 locations nationwide but excludes smaller fast-food operations in grocery stores and other venues.

• Despite earlier reports, Panera won’t be exempted.

What do people think?

Those in favor of the law claim it will raise the living standards of hundreds of thousands of workers, while critics say it will lead to higher prices for consumers, cause job losses, and force small businesses to close.

• Some chains, including McDonald’s, Chipotle, and Jack-in-the-Box, have already said they’ll have to raise menu prices because of the larger labor costs.

Arguments for: Proponents say the pay increase is necessary because they feel fast-food workers weren’t fairly compensated for their work, especially during the pandemic.

Gavin Newsom, Democratic Governor of California, said that many adults rely on these jobs to support their families, and refuted the idea that fast-food jobs are entry level jobs that mainly target teenagers.

• During the pandemic, the average age of a US fast-food worker was 26.4 years old, according to market research firm Datawheel.

Arguments against: Restaurant owners say the law will push hundreds of thousands of dollars in extra labor costs per year on them, which they can’t absorb without hiking prices for customers, cutting jobs, or reducing employee hours. Some say it could force them to close entirely.

Some of the consequences have already taken effect… Two Pizza Hut franchises in California are laying off more than 1,200 delivery drivers, saying they’ll have to cut corners because of the minimum wage increase.

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Grab Bag

Supersonic travel is coming back?

I don’t think most people would mind a three hour flight from New York to Los Angeles. Supersonic air travel hasn’t been an option to the general public since 2003, when the Concorde flew for the final time. But, thanks to a handful of companies, cutting your flight time in half might eventually become a reality again.

A few weeks ago, Boom Supersonic said its XB-1 prototype jet completed a successful test mission over the Mojave Desert. The prototype should, ideally, pave the way for Overture (the full sized model) to become the first commercial supersonic aircraft since the Concorde.

• The company said it already has orders or pre-orders of 130 jets to major airlines, including United and American.

However, there will be some obstacles

While this is progress, there are still some hurdles in the way of the business. Although Boom has raised over $700 million, Founder and CEO Blake Scholl says the company might need up to $8 billion to complete Overture.

Plus, regulations don’t allow sonic booms over land, which means only flights from the US that go off the mainland would be the only ones who could cut travel time. Critics also say supersonic flights raise sustainability concerns, as they burn more fuel than typical commercial planes.

But, there is some good news: Technological advancements could allow for sonic booms to become quieter, which are dubbed “sonic thumps,” allowing for continental flights that last as long as your midday nap.

Beer isn’t popular anymore? What?

Was it irresponsible to think I could keep beer sales up on my own? Maybe. Did I still try? Yes. Back in 2000, beer sales were around double than spirit sales. Now, spirits have outsold beer for a second straight year, and a lot of it has to do with beer caves.

Beer caves?

Mhhmm. The freezers in liquor and (sometimes) convenience stores that are loaded with every dad’s favorite (breakfast/lunch/dinner/dessert) drink. There are only around 30,000-40,000 of them in the US today, representing around 20% of convenience stores.

However, most Gen Z drinkers prefer a vodka soda or a rum and diet in place of beer and wine. This makes it hard for beer to make its glorious comeback and a tough call for retailers, especially since smaller beer caves can cost over $15,000 and 20-by-20-foot ones can be over $75,000, according to CStore Decisions.

Luckily, the newly published State of Beer Caves report (yes, its a real thing) from iSee Store Innovations tells us if the caves are truly worth it.

Are they worth it?

According to the report, the answer is an unsurprising yes, considering they sell the things to stores across the nation.

However, the report is still compelling:

• On average, stores with beer caves get 35% more foot traffic, and the average shopper will buy $6 more per visit.

• It also drives impulse purchases: Who wants a whole room temperature case of beer when you can grab one ice cold can to sample instead?

Though, there are challenges besides cost:

• The stores must keep the space clean and easy to navigate, which requires staff attention.

• Customers’ biggest complaints are inventory blocking doors, cluttered spaces, and difficulty finding items.

Not so fun fact: According to the report, female shoppers tend to avoid beer caves, because, well, they’re confined spaces that are typically poorly lit and we all know we don’t live in a utopia.

Fast Facts

Groundhog Daddy: Punxsutawney Phil, the psychic groundhog, just welcomed two babies with his rodent “wife,” Phyllis.

Moneyball: Ice Cube offered Iowa basketball star Caitlin Clark $5 million to play in BIG3, his 3-on-3 basketball league. In comparison, the average WNBA player makes $113,295, as of 2023.

Bird Brain: Japanese biologists discovered the first evidence of non-primate animals making a gesture that conveys a specific message. When observing Japanese tits (yes, that is the name of the bird), they fluttered their wings to signal their partner to “go ahead” and enter the nest first.

Damsel’s Door: The floating door from Titanic sold for $718,750 at auction. Sadly, Leo’s frozen body doesn’t come attached.

Sleep Study: Psychologists ran a study that had participants log four hours of sleep for two nights in a row, and the volunteers (aged 18 to 70) reported feeling at least four years older than they were, on average.