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Channel Reversal: Will The Free Market Leave London For Paris?

With Brexit woes dominating the UK and the fresh air of Macron's victory in France, capitalistic economics in Europe may be turned on its head.

Passengers checking in to travel on Eurostar in London
Passengers checking in to travel on Eurostar in London
Gaspard Koenig

-Analysis-

PARIS — It was just one year ago that France was bogged down in regular demonstrations against a labor reform law and the coming presidential election looked set to offer a depressing rematch between the outgoing president, François Hollande, and his predecessor, Nicolas Sarkozy. Across the Channel, meanwhile, all was looking bullish in Britain, where the unemployment level had fallen below 5%, the conservative government's bet on austerity had just been overwhelmingly approved by voters, and the European issue was finally going to be solved with the upcoming referendum. It would all add up to a confirmation of the stunning transformation of a dying empire into a paragon of the open modern society.

Now, in a brutal twist worthy of Shakespeare's Henry VI, the two destinies look like they've been reversed. The new French head of state, Emmanuel Macron, embodies a sort of liberal revival, promising to give back businesses some flexibility and to bring France back to the center of the European and world stage. On the contrary, after the referendum results defied all predictions, the long agony of Brexit has begun for our British neighbors, draining all of the public administration's energy and exacerbating jingoism in a mad dash in search of some ghost of old England.

The contrast is particularly gripping when it comes to labor law.

The British renouncement of the single market brings back the memory of lines of trucks in Dover, waiting to pass through custom controls. Every day brings a new difficulty, from renegotiating airline travel accords to military operations to scientific research collaboration. The UK must now undo ties that had been patiently woven for 40 years and hastily weave new ones from scratch. This labor of Sisyphus risks leaving Britain sovereign but isolated, a windswept rock in the middle of the North Sea, drunk on Laphroaig and Churchill quotes.

The current contrast with France is particularly gripping when it comes to labor law. Emmanuel Macron's program is still a work-in-progress, but it's founded on a clear change in philosophy: to protect the individual rather than the job. From this, should come reforms on retirement, unemployment insurance, and professional training, aimed at creating the safety nets of the digital era. On the contrary, the British Conservatives' new agenda led by Prime Minister Theresa May is a return to pre-Thatcher social policies, reinforcing by law the rights of the "insiders," in what May claims as "the greatest expansion of workers' rights by a Conservative government."

The British free-marketers who have long dreamed of being freed from the Brussels bureaucracy will now have plenty of time to revise Economics 101 and return to Friedrich Hayek"s lesson on why isolationism always leads to state interventionism.

For nearly 20 years, the Eurostar has been dropping off the young talents of France at London's St Pancras station: corporate executives but also teachers, IT engineers, writers, entrepreneurs, artists, all frustrated by the search in their own country for the best opportunities. In return, the Eurostar would pour on France a flow of British tourists and pensioners eager to take in the sun of Provence (there's now even a direct London-Aix en Provence train). France hadn't had such a hemorrhage of intellectual and economic capital since the Huguenots.

Shuttling back and forth between the two countries myself, according to professional opportunities and family choices, I am a witness to the fact that 300,000 French citizens living in London were not attracted by the British way of life nor even by the lower capital gains tax, but by a more dynamic labor market and, often, a more tolerant social environment. It was a perfect case of institutional arbitration that would please the authors of Why Nations Fail and all of those who underline the pre-eminence of the legal framework over cultural factors in accounting for a country's success.

Suddenly, modernity seems to have crossed the Channel. I don't share the Schadenfreude displayed by those like Paris Europlace, which shamelessly rushed to try (in vain) to strip the City of London of its finance companies. I am saddened that Brexit delays the reunification of peoples, diminishes the moral and diplomatic might of Europe, and deprives the Union of an important voice against the temptation of building in Brussels a Leviathan that reproduces the bad habits of our national states.

Even if I remain certain that London's cosmopolitan appeal won't vanish overnight, I cannot help but smile at the idea of soon seeing young Oxford graduates seeking exile in the newest "startup nation" that France may become. A valid EU visa will be required.

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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 but the simplest of errors exposed the scam and limited the damage to investors.

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.

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