Economy

Airing Of Goldman Sachs Dirty Laundry Stuns Ever Secretive Swiss Banking World

Wall Street was buzzing this week after Greg Smith quit his top executive job at Goldman Sachs with a scathing criticism of the investment bank in the New York Times. In Switzerland, where banking secrecy is paramount, his public act is virtually unthinka

Banks are everywhere in Geneva (tillwe)
Banks are everywhere in Geneva (tillwe)
Simon Schmid

ZURICH - It was the financial story heard around the world this week: investment banker Greg Smith, who managed assets worth billions and oversaw a dozen top staffers at Goldman Sachs, handed in his resignation letter in the most public way possible. Smith penned a New York Times article that explained why he was resigning as executive director, slamming the way the prestigious Wall Street bank does business. Every trace of integrity has disappeared from company culture; all that matters is money, Smith wrote, and Goldman Sachs clients -- routinely referred to as "muppets' -- are systematically ripped off.

The story made a particularly strong impact on the Swiss banking world – not so much for its contents (Goldman Sachs has the reputation of being one of the most rapacious Wall Street firms) as for the circumstances surrounding the revelations. That a top banker making accusations that serious would go public like that is nothing short of sensational in Switzerland.

"Anybody who reveals to the outside what goes on inside a bank is breaking a taboo," says Peter-René Wyder, president of the Swiss Bank Employees' Association. Professionally, such a person is finished in the industry: banks shy away from publicity the way the "devil avoids holy water" Wyder quipped.

But you don't have to be a senior-ranking Wall Street shark to ruin your future by going to the media. Tages-Anzeiger spoke with one woman who ought to know. In 2009, as a result of "restructuring," she was out of a job after 30 years with Swiss bank UBS. Disappointed and angry, she talked about the experience on Swiss TV. Her appearance made finding a new job that much more difficult. "Human resources managers may not admit it," she says, "but go to the media and you're branded for life, you will not be re-employed in banking."

Denise Chervet, central secretary of the Swiss Bank Employees' Association, says workers in finance tend to be cowed and afraid to recount their woes to the labor body "even anonymously." Particularly in the big banks, the working climate has gotten much worse over the past decade.

Disloyalty punished by "death"

"They are under increasing pressure to bring in clients and make profits," says association president Wyder. Conflicts of interest are frequent; client interests, instead, are often not respected, as they are mainly sold products that the bank is going to earn the most money on.

However, anybody who states this publicly is in for some big problems. What is perceived as a lack of loyalty is equivalent to a death sentence, says one Zurich headhunter. Anyone in finance who goes to the media, or writes a blog containing negative content about the sector incurs huge risks, even if they do it anonymously: people know each other in the sector, and it quickly becomes clear who is behind the criticisms.

Those in the sector who take legal action against employers – for example, over disagreement about commission payments -- are also in for a hard time. According to the Zurich headhunter, the only possibility of finding a new job for such employees, no matter how brilliant their qualifications, is simply changing sector.

Some Swiss bankers, afraid that having worked for an American firm could turn out to be a stigma, are presently changing jobs anyway. And financial institutions are also taking measures: contracts are spelling out what will happen if a banker decides to spill the beans to the media, further ensuring that bankers keep a zipped lip about what happens on the job.

Against this background, the fact that Greg Smith aired his opinions in the world's most-read newspaper deserves attention. "Respect," says the former UBS employee who has yet to find another job. She says that virtually no one else fired when she lost her job had the nerve to speak up. But she's also clear that only a top earner could afford to do it: "Some of us wouldn't even have the money to pay a lawyer," she says.

But for the Zurich headhunter, Smith's tell-all article leaves something of an aftertaste. "Why only go to the media now?" he asks. For some in the financial sector, in fact, Smith's criticisms are nothing short of hypocrisy. As an executive director, he benefitted for years from exactly the climate he is now taking to task.

Read the original article in German

Photo - tillwe

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ