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Silicon Valley Bank’s Assets Seized By US Regulators

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Silicon Valley Bank

The assets of one of Silicon Valley’s top banks were seized by regulators on Friday, marking the largest failure of a U.S. financial institution since the height of the financial crisis nearly 15 years ago.

Silicon Valley Bank, the nation’s 16th-largest bank, failed this week after depositors rushed to withdraw funds amid concerns about the bank’s health. After the failure of Washington Mutual in 2008, it was the second-largest bank failure in US history.

The bank primarily served technology workers and venture capital-backed businesses, including some of the industry’s most well-known brands.

“This is an extinction-level event for startups,” Garry Tan, CEO of Y Combinator, launched Airbnb, DoorDash, and Dropbox and has referred hundreds of entrepreneurs to the bank, told the Associated Press.

“I’ve heard from hundreds of our founders asking for advice on how to get through this. They’re wondering, ‘Do I have to furlough my employees?'”

There appeared to be little chance of the chaos spreading throughout the banking sector, as it did in the months preceding the Great Recession. The largest banks were most likely to cause an economic meltdown to having strong balance sheets and ample capital.

Silicon Valley Bank customers

According to the bank’s website, nearly half of the U.S. technology and healthcare companies that went public last year after receiving early funding from venture capital firms were Silicon Valley Bank customers.

The bank also boasted of its connections to leading technology companies such as Shopify, ZipRecruiter, and Andreesson Horowitz, one of the top venture capital firms.

Tan estimates that nearly one-third of Y Combinator startups will be unable to make payroll within the next month if they cannot access their funds.

Roku, an Internet TV provider, was one of the victims of the bank’s demise. It disclosed in a regulatory filing on Friday that Silicon Valley Bank held approximately 26% of its cash, or $487 million.

Roku stated that its deposits with SVB were largely uninsured and did not know “to what extent” it could recover them.

As part of the seizure, California bank regulators and the FDIC transferred the bank’s assets to the Deposit Insurance Bank of Santa Clara, a newly formed institution. On Monday, the new bank will begin paying out insured deposits. The FDIC and California regulators intend to sell the remaining assets to make other depositors whole.

Attempting to raise capital

The banking sector has been in turmoil all week, with shares falling by double digits. Then, on Friday, news of Silicon Valley Bank’s troubles pushed shares of almost all financial institutions even lower.

The failure struck with lightning speed. According to some industry analysts, the bank is still a good company and a wise investment. Meanwhile, executives at Silicon Valley Bank were attempting to raise capital and find new investors. However, extreme volatility halted trading in the bank’s shares before the stock market opened.

The FDIC decided to close the bank shortly before noon. Notably, as is customary, the agency did not wait until the end of the business day. The FDIC could not immediately find a buyer for the bank’s assets, indicating how quickly depositors cashed out.

Treasury Secretary Janet Yellen is “watching closely,” according to the White House. The administration attempted to reassure the public that the banking system is in much better shape than it was during the Great Recession.

“Our banking system is fundamentally different than it was a decade ago,” said Cecilia Rouse, chair of the White House Council of Economic Advisers. “The reforms implemented at the time provide the kind of resilience that we’d like to see.”

After the value of mortgage-backed securities linked to ill-advised housing loans collapsed in 2007, the world experienced the worst financial crisis since the Great Depression. The Wall Street panic caused the demise of Lehman Brothers, a firm founded in 1847. Because major banks were so intertwined, the crisis caused a cascading breakdown in the global financial system, putting millions out of work.

According to the FDIC, Silicon Valley Bank, based in Santa Clara, California, had $209 billion in total assets at the time of its failure. It was unclear how many of its deposits exceeded the $250,000 insurance limit, but previous regulatory reports showed that many accounts did.

On Thursday, the bank announced plans to raise $1.75 billion to strengthen its capital position. This frightened investors and shares fell 60%. They fell even further before the opening of the Nasdaq, where the bank’s shares were traded.

As the name suggests, Silicon Valley Bank was a major financial conduit between the technology sector, startups, and tech workers. If a startup founder wanted to find new investors or go public, establishing a relationship with a bank was thought to make good business sense.

Founded in 1983 during a poker game by co-founders Bill Biggerstaff and Robert Medearis, the bank leveraged its Silicon Valley roots to become a financial cornerstone in the tech industry.

Bill Tyler, CEO of TWG Supply in Grapevine, Texas, said he first noticed something was wrong when one of his employees texted him at 6:30 a.m. Friday to complain about not receiving their paychecks.

TWG, which has only 18 employees, had already sent the check money to a payroll services provider that used Silicon Valley Bank. Tyler was trying to figure out how to pay his employees.

“We’re waiting on about $27,000,” he explained. “It’s already a late payment. It’s already an awkward situation. I don’t want to ask any of my employees, “Hey, can you wait until next week to get paid?”

Silicon Valley Bank’s ties to the technology sector exacerbated its problems. After a growth surge during the pandemic, technology stocks have taken a beating in the last 18 months, and layoffs have spread throughout the industry. Venture capital funding is also on the decline.

At the same time, the Federal Reserve’s fight against inflation and an aggressive series of interest rate hikes to cool the economy weighed heavily on the bank.

The value of generally stable bonds begins to fall as the Fed raises its benchmark interest rate. That is not usually a problem, but when depositors become concerned and withdraw their funds, banks may be forced to sell those bonds before they mature to cover the departure.

That is precisely what happened to Silicon Valley Bank, which was forced to sell $21 billion in highly liquid assets to cover the unexpected withdrawals. It suffered a $1.8 billion loss on the sale.

Ashley Tyrner, CEO of FarmboxRx, said she had spoken with several friends whose businesses are venture-backed. She described them as “beyond themselves” after the bank’s failure. Tyrner’s chief operating officer attempted to withdraw funds from her company on Thursday but could not do so in time.

“One friend said they couldn’t make payroll today and cried because they had to notify 200 employees,” Tyrner said.

Geoff Thomas is a seasoned staff writer at VORNews, a reputable online publication. With his sharp writing skills and deep understanding of SEO, he consistently delivers high-quality, engaging content that resonates with readers. Thomas' articles are well-researched, informative, and written in a clear, concise style that keeps audiences hooked. His ability to craft compelling narratives while seamlessly incorporating relevant keywords has made him a valuable asset to the VORNews team.

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NASA Astronauts Arrive For Boeing’s First Human Spaceflight

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The location is Cape Canaveral, Florida. On Thursday, the two NASA astronauts designated for Boeing’s inaugural manned space mission arrived at the launch site approximately one week before their planned departure.

Butch Wilmore and Suni Williams have been selected as test pilots for Boeing’s Starliner capsule, marking its inaugural crewed mission following significant delays. On Thursday, they traveled by air from Houston to Kennedy Space Center.

AP – VOR News Image

NASA Astronauts Arrive For Boeing’s First Human Spaceflight

Scheduled for launch on May 6 using an Atlas rocket, the Starliner spacecraft will go to the International Space Station for a week-long test mission. Boeing is endeavoring to close the gap with SpaceX, which has been conducting manned space missions for NASA since 2020.

Boeing’s two earlier Starliner test flights were unmanned. The initial launch in 2019 was unsuccessful in reaching the space station due to software malfunctions and other technical issues. Boeing replicated the demonstration in 2022. In more recent times, the capsule encountered problems with its parachutes and had to address the issue of flammable tape that needed to be eliminated.

Wilmore emphasized that this is a test flight intended to uncover any anomalies.

AP – VOR News Image

NASA Astronauts Arrive For Boeing’s First Human Spaceflight

Do we anticipate flawless execution? “This is the inaugural manned voyage of the spacecraft,” he informed the press. “I am confident that we will discover information.” This is the reason why we engage in this activity.

NASA enlisted the services of SpaceX and Boeing ten years ago, allocating billions of dollars to facilitate the transportation of personnel to and from the space station. Despite the space station’s planned closure by 2030, the space agency remains enthusiastic about procuring capsules from two rival businesses to transport its astronauts.

“That is of utmost importance,” Wilmore remarked.

AP – VOR News Image

NASA Astronauts Arrive For Boeing’s First Human Spaceflight

Wilmore and Williams are set to become the inaugural astronauts to embark aboard an Atlas rocket since NASA’s Project Mercury in the early 1960s.

SOURCE – (AP)

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The TikTok Law Kicks Off A New Showdown Between Beijing And Washington. What’s Coming Next?

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WASHINGTON – TikTok is preparing to engage in a legal battle against a U.S. legislation that would compel the social media platform to sever its connections with its China-based parent company. Chinese authorities likely support this action, as the intense rivalry between the United States and China jeopardizes the future of a highly popular online platform for young Americans to connect.

Beijing has indicated that TikTok should resist what it perceives as a “robbers” move by U.S. politicians who aim to seize all the valuable assets possessed by others. If a judicial challenge is unsuccessful, experts believe that Chinese authorities are unlikely to permit a sale, as this may be interpreted as yielding to Washington.

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The TikTok Law Kicks Off A New Showdown Between Beijing And Washington. What’s Coming Next?

Alex Capri, a senior lecturer at the National University of Singapore and research fellow at Hinrich Foundation, suggests that Beijing is concerned about the negative implications that the U.S. action against the popular short-form video platform could have, as it may establish an undesirable precedent. “If Beijing surrenders to the United States, what will be the ultimate outcome?”

Parent firm ByteDance issued its first formal comment on the new rule in a post on Toutiao, a Chinese news app owned by the company. The statement explicitly mentioned that ByteDance has no intention of selling TikTok. In response to media reports, the firm based in Beijing addressed the speculation around exploring potential possibilities for selling TikTok’s U.S. business.

The legislation that U.S. President Joe Biden signed this week may allow Washington to extend its reach to target other China-related apps, such as the well-known e-commerce platform Temu, according to Hu Xijin, a former editor-in-chief for the party-run newspaper Global Times. Furthermore, it could encourage U.S. allies to take similar actions.

According to Hu, a political commentator, TikTok, with its 170 million American users, should display more courage and determination by refusing to give up and fighting until the very end.

TikTok has pledged to contest the recently enacted U.S. legislation that mandates ByteDance to sell off its ownership interests within a one-year timeframe in order to prevent a ban. The corporation has described the regulation as a violation of the freedom of expression of its users, the majority of whom utilize the program for amusement purposes.

The company expressed confidence in its position, stating that it firmly thinks the facts and the law support its case, and they are confident in its ultimate victory.

The dispute around TikTok has escalated the tensions between the United States and China, as both countries have pledged to safeguard their economic and national security concerns. U.S. legislators are apprehensive about the Chinese ownership of the application, as it may potentially enable Beijing to exercise undesirable influence on the United States, particularly on the impressionable minds of young individuals.

Washington has achieved a series of triumphs in reducing the influence of Chinese corporations through bans, export controls, and forced divestitures. This has led to protests from Beijing, who believe that the U.S. is intentionally trying to suppress China’s economic growth through coercion.

AP – VOR News Image

The TikTok Law Kicks Off A New Showdown Between Beijing And Washington. What’s Coming Next?

The United States has previously compelled Chinese corporations to sell off their assets. For instance, in 2020, Beijing Kunlun, a Chinese mobile video game company, agreed to divest itself of the gay dating app Grindr following a directive from the federal government. However, TikTok, which was developed by a Chinese corporation exclusively for the international market, serves as a prominent example of China’s technological prowess on a worldwide scale. Beijing is determined not to relinquish control over this influential platform.

Gabriel Wildau, managing director of Teneo, a consultancy and advisory firm based in New York, stated that national dignity is at risk and may be prioritized over the financial interests of ByteDance investors, especially global investors with a 60% stake in the company.

The corporation is anticipated to mount a legal battle that will heavily rely on First Amendment considerations and has the potential to be protracted for several years. Analysts assert that Beijing is relying on a favorable legal outcome.

The course of action to be taken if TikTok fails to succeed is currently under discussion with the Chinese authorities, according to Dominic Chiu, an analyst with Eurasia Group. Chiu stated that President Xi Jinping, who has the authority to approve or disallow the transaction, has likely yet to make the definitive choice.

Fortunately for Xi, Beijing does not face any immediate pressure to decide, according to Sun Yun, the director of the China program at the Stimson Center in Washington. “There is a possibility for numerous alterations,” she stated.

If lawmakers’ desire for a sale of TikTok is fulfilled, the procedure is expected to be complicated for the company. TikTok would need to separate its activities in the United States from all other aspects of its business.

Firstly, the cost of acquiring TikTok’s U.S. operations, although undisclosed, is anticipated to be substantial enough to significantly restrict the number of potential investors and companies capable of affording it. Several investors, including former Treasury Secretary Steve Mnuchin, have already positioned themselves as potential purchasers of a U.S. iteration of TikTok. According to market tracker Pitchbook, ByteDance, a privately held company, has a valuation of $220 billion.

There is now a lack of clarity on the fate of the TikTok algorithm, which is the secret formula responsible for delivering personalized short videos to users depending on their preferences. This algorithm has played a significant role in establishing TikTok as a dominant force in popular culture.

ByteDance would be prohibited from having control over the algorithm of a U.S. subsidiary of TikTok. According to many experts, Chinese authorities are likely to prohibit the sale of the technology that appears in people’s TikTok feedsbased on the amended export regulations of 2020. After the federal courts blocked former President Donald Trump’s attempt to outlaw TikTok through an executive order, this revision took place.

AP- VOR News Image

The TikTok Law Kicks Off A New Showdown Between Beijing And Washington. What’s Coming Next?

According to certain individuals, including Mnuchin, it is necessary to reconstruct TikTok in the United States by employing novel technology. However, it is uncertain how this will manifest or how effectively it will replicate the kind of video suggestions that viewers have become accustomed to.

According to Robin Burke, a professor of information science at the University of Colorado Boulder, certain elements of the algorithm might potentially be duplicated by individuals within the company. However, he also observed that TikTok has certain areas where it outperforms its competition, making it difficult to replicate.

“TikTok possesses extensive experience and a wealth of data,” Burke stated. “I believe it is improbable for a U.S. company, without inheriting the technology from its parent company, to construct something of equal caliber.” Definitely not immediately.

SOURCE – (AP)

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FTC Sends $5.6 Million In Refunds To Ring Customers As Part Of Video Privacy Settlement

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The backslash character – escapes special characters in programming languages and other contexts. The following information is from a news article published by the Associated Press: Due to a settlement with Amazon-owned Ring, the Federal Trade Commission is giving consumers over $5.6 million in reimbursements. Ring was accused of neglecting to safeguard private video data against unauthorized access.

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FTC Sends $5.6 Million In Refunds To Ring Customers As Part Of Video Privacy Settlement

The FTC complained in 2023, alleging that the doorbell camera and home security provider permitted its employees and contractors to gain access to consumers’ confidential videos. Ring purportedly utilized this film for algorithmic training without obtaining authorization, among other objectives.

Ring was additionally accused of neglecting to install crucial security measures, thereby allowing hackers to get control over customers’ accounts, cameras, and footage. The FTC observed that this resulted in severe breaches of users’ privacy.

The final settlement necessitated Ring to remove unlawfully acquired content, implement enhanced security measures, and pay a substantial penalty. The FTC is currently utilizing a significant portion of the funds to provide refunds to qualifying Ring customers.

reviewed – VOR News Image

FTC Sends $5.6 Million In Refunds To Ring Customers As Part Of Video Privacy Settlement

As per a notice issued on Tuesday, the FTC will be delivering 117,044 PayPal payments to consumers who were affected and owned specific types of Ring devices, such as interior cameras, during the periods when unlawful access is claimed to have occurred.

Customers who meet the requirements must claim these payouts within 30 days, as stated by the FTC. The FTC also mentioned that consumers can reach out to Rust Consulting, the refund administrator for this case, or refer to the FTC’s FAQ page on refunds for further details regarding the procedure.

Ring has stated that unauthorized individuals used stolen email addresses and passwords from other companies to gain unlawful access to certain customers’ Ring accounts in 2019. This occurred because these customers used the same login credentials on multiple websites. Upon discovering this breach, Ring promptly notified the affected customers and took measures to safeguard their accounts.

Ring did not promptly respond to the FTC’s accusations regarding employees and contractors inappropriately viewing footage.

Wired – VOR News Image

FTC Sends $5.6 Million In Refunds To Ring Customers As Part Of Video Privacy Settlement

In a recent announcement, the California-based company confirmed that it will no longer accept requests from police agencies to access doorbell camera footage from its users. This decision effectively terminates a controversial function that had faced scrutiny from privacy advocates.

SOURCE – (AP)

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