Another Hindenburg Disaster?

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March 24, 2023

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TOGETHER WITH

Good morning and Happy Friday.

TikTok CEO Shou Zi Chew probably wishes they had a 60-minute time-limit on Capitol Hill hearings like the one he recently added for kids on his short-form video platform. Instead, Chew faced five grueling hours of questioning from congressional leaders.

Lawmakers arrived loaded for bear, concerned that the Chinese-owned social network hypothetically could be used to harm US national security interests. And, for his part, Chew offered little comfort. When asked whether the Chinese government has instructed parent-company ByteDance to spy on Americans, Chew responded “I don’t think ‘spying’ is the right way to describe it.” Though he also had to answer typically inane questions like “Does TikTok access a home’s wifi network?” Sure, TikTok may make you feel old, but hearing congressmen publicly speak about TikTok will always make you feel positively neonatal.

Morning Brief

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For chipmakers, forever chemicals are worth preserving.

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Hindenburg attacks the Block.

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The FTC targets subscription services.

Chemicals

The Semiconductor Industry Wants To Water Down “Forever Chemicals” Regulation

(Photo Credit: Chris Reid/Unsplash)

Can you believe that in the 18th century, aristocrats used lead-based makeup? Honestly, what kind of society would expose itself to a toxic substance on a day-to-day basis? Ahem…

Governments are moving to place restrictions on the use of so-called forever chemicals, i.e. the ones that don’t break down naturally and build up inside the human body. While it might seem like a no-brainer to curb the flow of permanent pollutants into our environment and anatomies, the powerful and politically ascendant semiconductor sector has been lobbying to make sure new laws aren’t too hardcore.

Toxic BFFs

The scientific name for forever chemicals is “perfluoroalkyl and polyfluoroalkyl substances,” or PFAS if you already hit your daily syllable quota. While there are thousands of different chemicals underneath the PFAS umbrella, what they have in common are molecules made of hydrogen and fluorine. Hydro-fluorine bonds are extremely resilient and take a tremendous amount of energy to break.

PFAS are in a huge range of household products including makeup, furniture, and clothing. The problem is they are increasingly being linked to a garland of health problems. The US is starting to regulate the chemicals on both a state and federal level:

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Maine led the charge in 2021 by introducing a bill that will ban PFAS in all products by 2030. California passed a bill in 2022 banning PFAS in cosmetics and textiles.

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The EPA last week proposed new national drinking water rules that would force water systems to watch out for six specific PFAS.

Legislation is being considered elsewhere and per a report in the Financial Times semiconductor giants including Intel and IBM — which utilize the chemicals during the manufacturing process — are fighting proposed restrictions in US states and Europe, arguing they would damage the only-recently-unsnarled chip supply chain.

Regulators may be racing against the clock. Elsie M. Sunderland, an environmental chemist at Harvard, told Vox that by the time a chemical is found to be damaging, it’s often too late. “Everybody calls PFAS the chemical whack-a-mole. You get rid of one of them and the industry just uses another one,” she said.

Not all bad news: The omnipresent threat of PFAS is pretty alarming: they’ve been found in the bloodstreams of around 97% of US adults according to the CDC. But they’re not totally indestructible. Researchers at The University of British Columbia announced earlier this week they’d found new ways of breaking the bonds in PFAS. Still, Madjid Mohseni, one of the researchers on the project, cautioned The Guardian that getting the new chemical-busting technologies to be adopted would be difficult and costly. “The other way to fix this, and this would be exciting, is for industry not to use the chemicals any more,” said Mohseni, a forever optimist.

– Isobel Asher Hamilton

Corporate News

Cash App is Lying to Investors and Abetting Crime, Short Seller Says

A short-seller attacks the Block.

Fresh off its nation-rattling takedown of India’s most powerful corporation, Hindenburg Research released a damning report Thursday alleging that the Jack Dorsey-led tech conglomerate Block facilitates fraud, avoids regulation, and misleads shareholders with inflated metrics.

Where There’s Smoke

Hindenburg’s two-year investigation focused primarily on Block’s Cash App, a fintech program that doesn’t require users to connect to traditional bank accounts. While Dorsey and co. would like investors to believe that Cash App serves 51 million active users monthly, that might not be the case. Through multiple interviews, Hindenburg said former employees estimated that 40% to 75% of Cash App’s accounts were either fake, involved in crime, were additional accounts tied to a single user, or some combination of the three. Block employees also told Hindenburg that in order to keep growth strong during the pandemic — allowing Dorsey and Block co-founder James McKelvey to sell more than $1 billion in company stock — Cash App disregarded warning signs of criminal activity and failed to uphold basic security measures.

One of the more striking if peculiar aspects of Hindenburg’s analysis is a compilation video of rappers singing about how they use Cash App to pay for drugs, sex workers, and even assassins. While the legal admissibility of rap lyrics is not yet settled law, most musicians tend to write what they know. In one instance (totally unrelated to Block), California rapper Nuke Bizzle released what is essentially a how-to music video about committing unemployment fraud. Only a few weeks later he was arrested for scamming the government out of $1.2 million in Covid relief funds, $85,000 of which was transferred via Cash App.

It doesn’t stop there either:

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Hindenburg argues Cash App plays an important role in violent crime. The Polaris Project, a nonprofit that fights forced prostitution, said Cash App is one of the top facilitators of sex trafficking, including of minors, in the US, and that’s backed up by multiple indictments from the Department of Justice.

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When the Drug Enforcement Administration arrested 60 gang members in San Francisco in 2021, prosecutors found that the Sinaloa cartel – the El Chapo one – handled much of its payments for fentanyl and methamphetamine shipments through Cash App.

‘Another Big One’: Hindenburg’s expansive report on Block comes only two months after the short seller delivered similarly explosive findings on Adani Group. It argued that the Indian conglomerate, which at the time was worth $218 billion, dabbled heavily in stock manipulation and accounting fraud. Since then, the company has lost more than $100 billion in its market value and its share price has dropped nearly 50%. So buckle up, Jack, it might be a bumpy ride.

– Griffin Kelly

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Media

FTC Wants to Make Ending Subscriptions a Lot Easier

The government is fully embracing cancel culture.

For subscriptions, that is. On Thursday, the Federal Trade Commission proposed a new “click to cancel” rule that would make it easier to break up with those clingy subscriptions in your life. Good riddance.

Like, Comment, and Unsubscribe

We all know the feeling: You sign up for a free trial and then 12 weeks later a fresh shipment of razor blades arrives on your doorstep accompanied by a $20 dent on your credit card bill and the annoying thought Oh did I forget to cancel that? Then you log on to your computer, reset a password you long forgot, and navigate a labyrinth of nested menus and please-oh-please-won’t-you-stay promotions before wriggling out of monthly collections. Or, even worse, you have to get on the phone with an actual breathing human being. Then, finally relaxed, you fire up your Roku and realize you’ve been paying for Discovery+ for seven months because of that one time when you wanted — nay, needed — to watch Planet Earth II.

Signing up is as easy as punching in your credit card digits and clicking one button. Canceling, not so much. Finally, the government wants to help forgetful subscribers everywhere:

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The proposed rule would require companies to make canceling subscriptions just as easy as it is to sign up for one — crucially, ending phone calls for services customers signed up for online.

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Failure to comply would result in a $50,000 fine per violation. That means a service with one million subscribers risks a $50,000,000,000 fine.

“The idea here is pretty simple,” FTC chair Lina Khan told reporters. “Companies shouldn’t be able to manipulate consumers into paying for subscriptions they don’t want.” That’s a philosophy we can subscribe to.

Recurring Headaches: The federal agency voted to approve the notice of the proposed rule 3-1, though the ‘if’ and ‘when’ it becomes law remains an open question. In the meantime, you can keep putting off that awkward in-person chat with the muscled rep about why you no longer want to pay $50 a month to not trot on a treadmill at the gym you never go to.

– Brian Boyle

Extra Upside

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Grab the popcorn: Movie theater stocks rally after Apple announces $1 billion plan for cinema releases.

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Long may you run: GM to stop making classic muscle car Chevy Camaro.

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Just For Fun

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Thread the needle.

Have a great weekend!

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