WEBVTT - JPMorgan Settles, Nasdaq Buys Adenza

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<v Speaker 1>This is Bloomberg Law with June Grasso from Bloomberg Radio.

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<v Speaker 2>This is Bloomberg Law. I'm Madison Mills in for June

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<v Speaker 2>Grasso this week. Well, JP Morgan has agreed to pay

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<v Speaker 2>two hundred and ninety million dollars to settle a lawsuit

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<v Speaker 2>alleging it knowingly benefited from former client Jeffrey Epstein's sex trafficking.

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<v Speaker 2>That's according to a person familiar with the matter in

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<v Speaker 2>Bloomberg News reporting. So joining us now to discuss this

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<v Speaker 2>is Hannah love It, Bloomberg News finance reporter. Hannah, thank

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<v Speaker 2>you so much for being with us on the line.

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<v Speaker 2>Just give me the context here for anyone who hasn't

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<v Speaker 2>been following. What are the charges here and what are

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<v Speaker 2>the details of the lawsuit?

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<v Speaker 3>Hey, thank you so much for having me so an

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<v Speaker 3>unnamed victim of Jeffrey Epstein's food JP Morgan the biggest

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<v Speaker 3>us thank late last year alleging, as you said, that

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<v Speaker 3>it knowingly benefited from Epstein's sex trafficking. So Epstein was

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<v Speaker 3>a client of JP Morgan from the late nineties until

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<v Speaker 3>twenty thirteen. Now, remember Jeffrey Epstein was you know, indicted

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<v Speaker 3>in Florida in two thousand and six, and you know,

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<v Speaker 3>then again arrested in twenty nineteen and went to jail

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<v Speaker 3>and that's where he died. So this was coming up,

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<v Speaker 3>you know, really a couple of years after that, it

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<v Speaker 3>kind of reignited this really the storm across Wall Street

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<v Speaker 3>as far as like ties to Epstein And can you help.

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<v Speaker 2>Me contextualize the number here? Two hundred and ninety million.

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<v Speaker 2>Is that a drop in the bucket for JP Morgan?

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<v Speaker 2>How does that square for them?

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<v Speaker 1>Yeah?

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<v Speaker 3>I mean they've they've been fined, you know, I think

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<v Speaker 3>they paid something like nine hundred million to settle hooping

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<v Speaker 3>charges a couple of years ago and some more in that.

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<v Speaker 3>But yet they paid two hundred and fifty million a

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<v Speaker 3>little more than a year ago to settle what's that

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<v Speaker 3>probe about, you know, communicating with clients on on unauthorized channels.

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<v Speaker 3>So that would be the one the closest kind of

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<v Speaker 3>comparison in recent memory as far as what it means

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<v Speaker 3>to the JP Morgan.

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<v Speaker 2>And so what does the the payout tell us in

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<v Speaker 2>terms of JP Morgan's accountability here? And what are what's

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<v Speaker 2>the bank saying about that accountability?

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<v Speaker 3>Yeah, so what we reported citing sources is that the

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<v Speaker 3>bank is not making admissions of liability as part of

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<v Speaker 3>the settlement. So that's, you know, what we're expecting to

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<v Speaker 3>be the line from from them. And they've been fighting

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<v Speaker 3>this lawsuit in another lawsuit from the US Virgin Islands

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<v Speaker 3>over their types to Epstein, you know, pretty vigorously. So yeah,

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<v Speaker 3>I would say that's you know, Jamie Diamond himself, the

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<v Speaker 3>CEO of JP Morgan. You know, he's been deposed as

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<v Speaker 3>part of this. He's said repeatedly that he never met

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<v Speaker 3>Jeffrey Epstein or knew who he was, things like that.

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<v Speaker 3>But he's said that, you know, their hard squat victims

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<v Speaker 3>and things like that. So this kind of I mean,

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<v Speaker 3>the fact that they settled with the victims is not

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<v Speaker 3>a huge surprise in that sense.

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<v Speaker 2>And you mentioned some other lawsuits, including the one by

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<v Speaker 2>the US Virgin Islands where he had a private retreat

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<v Speaker 2>Epstein and brought several of his victims previously. Can you

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<v Speaker 2>tell me anything that we might know about that lawsuit

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<v Speaker 2>and whether or not, you know, the outcome of today

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<v Speaker 2>has any sort of impact on that lawsuit or what

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<v Speaker 2>bank executives are thinking about that one as well.

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<v Speaker 3>Yeah, So that one's ongoing. It was filed around the

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<v Speaker 3>same time as the victim one was filed, and you know,

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<v Speaker 3>as of today, as of right now, that one is

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<v Speaker 3>still going on. And then Jason Morgan also turned around

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<v Speaker 3>in March and to one of their former executives, Jeff Bailey,

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<v Speaker 3>you know, seeking to blame him for their ties, for

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<v Speaker 3>the firm's ties to Epstein, saying he misled them and

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<v Speaker 3>things like that. So that both of those are so ongoing.

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<v Speaker 2>Yeah, I wanted to ask you about that suit against

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<v Speaker 2>Jess Staley as well. Have you learned anything else from

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<v Speaker 2>your sources about what that might look like for the

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<v Speaker 2>bank and from Staley's perspective as well.

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<v Speaker 3>Yeah, I mean, there's nothing new about that today. There

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<v Speaker 3>that was you know, not part of the Japon Morgan's

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<v Speaker 3>settlement with the victims other than that, what you know,

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<v Speaker 3>part of what Jake and Morgan is speaking in their

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<v Speaker 3>suit against Staley is for him to be liable for

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<v Speaker 3>you know, an any damages or anything like that that

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<v Speaker 3>they pay out to these plaintiffs. So that will be

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<v Speaker 3>something to watch, but there were no updates today. However,

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<v Speaker 3>Staley was deposed over the weekend, and so we've written

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<v Speaker 3>a bit about that that it happened basically.

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<v Speaker 2>And that's kind of unprecedented, right, that's a pretty big

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<v Speaker 2>deal to kind of sue Staley through a third party complaint.

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<v Speaker 1>Yeah.

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<v Speaker 3>I would describe it as it was a ramatic term

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<v Speaker 3>in this saga when it happened.

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<v Speaker 2>Yeah, And this is kind of a question across Wall

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<v Speaker 2>Street because there are so many associations with Epstein from

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<v Speaker 2>other institutions as well. Do you anticipate any other banks

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<v Speaker 2>getting swept up in this beyond JP Morgan?

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<v Speaker 3>Yeah, So Deutsche Bank actually settled with so when Epstein

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<v Speaker 3>left JP Morgan, he went to Deutsche Bank, that's what

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<v Speaker 3>he was a client, and they settled with victims for

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<v Speaker 3>seventy five million. I believe something in that ballpark fairly recently.

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<v Speaker 2>So beyond Deutsche Bank, though, we think that is that

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<v Speaker 2>the kind of final for now, the final shoot a

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<v Speaker 2>drop when it comes to the names.

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<v Speaker 3>Oh yeah, So the two banks that have really been

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<v Speaker 3>in the spotlight over this are JAKEI Morgan and deutsch Bank.

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<v Speaker 1>Yeah.

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<v Speaker 2>Yeah, And I just continue to think about the bank

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<v Speaker 2>kind of making no admission of liability in connection with

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<v Speaker 2>the settlement, which we learned from your reporting. You know,

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<v Speaker 2>do we anticipate any pushback from that lack of admission

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<v Speaker 2>of liability from clients, investors in the bank, or is

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<v Speaker 2>this just kind of, you know, a payout that is

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<v Speaker 2>going to silence the conversation and distance JP Morgan from

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<v Speaker 2>the the Epstein ongoing saga as a whole.

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<v Speaker 3>Yeah, I mean that's a great question. I've been like

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<v Speaker 3>even the you know, David Boyce is one of the

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<v Speaker 3>attorneys for Jane Doe said today in his statement that

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<v Speaker 3>you know, it's a great day for Jeffrey Epstein's survivors,

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<v Speaker 3>a great day for justice. So that was the reaction

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<v Speaker 3>we saw from him. And then yeah, I haven't heard

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<v Speaker 3>anything to the country as far as like, you know,

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<v Speaker 3>from the clients or things like that, or any skill over.

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<v Speaker 3>I think as far as you know, the wider JP

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<v Speaker 3>Morgan apparatus was concerned, it was a bit. I mean,

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<v Speaker 3>it's been six months of just you know, the drip

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<v Speaker 3>drip of more emails released and things like that, so

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<v Speaker 3>I think it was and these things are all, you know,

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<v Speaker 3>a decade old at this point, so it was probably

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<v Speaker 3>you know, people are looking forward to putting this behind them.

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<v Speaker 3>Inside Jacob Morgan.

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<v Speaker 2>Well, and speaking of kind of your other reporting when

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<v Speaker 2>it comes to JP Morgan dealing with this, help our

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<v Speaker 2>audience remind our audience about the executive within JP Morgan

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<v Speaker 2>who has had some emails with Jeffrey Epstein unveiled in

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<v Speaker 2>recent weeks.

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<v Speaker 3>Yeah, so I had a story out today about Mary Erdos,

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<v Speaker 3>who is the longtime chief of the Asset and wealth

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<v Speaker 3>management unit at Jacob Morgan. She actually succeeded Jeff Bailey

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<v Speaker 3>a top of the private bank when he got promoted

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<v Speaker 3>to the head of that unit in two thousand and five,

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<v Speaker 3>and then when he got moved over to the investment

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<v Speaker 3>in two thousand and nine, she succeed him a top

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<v Speaker 3>asset and wealth management where she still is today. And

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<v Speaker 3>so she's the one, you know, as far as still

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<v Speaker 3>still remaining JP Morgan executives, you know, people who haven't

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<v Speaker 3>left the firm and things like that, who has you know,

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<v Speaker 3>she's had emails coming out of this thing this whole time.

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<v Speaker 3>You know she was she ran the private bank and

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<v Speaker 3>then all of f and wealth management. So that's you know,

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<v Speaker 3>she she has been contending with that.

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<v Speaker 2>And in our final couple of minutes together, can you

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<v Speaker 2>walk me through a little bit more of what was

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<v Speaker 2>in those emails and what it tells us about not

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<v Speaker 2>just Mary's connection with Ebstein, but the bank's broader connection

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<v Speaker 2>with him.

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<v Speaker 3>Yeah, I mean there are a ton I think the

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<v Speaker 3>number for the emails exchanged between Staley and Epstein during

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<v Speaker 3>Staley's time at JP Morgan itself was more than a thousand.

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<v Speaker 3>So we're looking at, you know, a lot of a

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<v Speaker 3>lot of emails and a lot of discovery materials that

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<v Speaker 3>were then you know, fifted through and put into these

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<v Speaker 3>lawsuits and things like that. I mean, it's everything from

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<v Speaker 3>you know, scheduling to trying to at one point, you know,

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<v Speaker 3>was portraying himself as a close advisor to Bill Gates

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<v Speaker 3>and trying to set up a meeting with people at

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<v Speaker 3>JP Morgan for a fund, his idea for a fund,

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<v Speaker 3>and things like that. So it's really kind of all

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<v Speaker 3>over the board about over things like that.

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<v Speaker 2>Yeah, I'm just reading your story. One of the quotes

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<v Speaker 2>from Epstein that he wrote to Mary Rosa and her predecessor,

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<v Speaker 2>former mentor Just Daly, in an email saying, I'm well

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<v Speaker 2>aware of my current unfortunate rainbow. I am also aware

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<v Speaker 2>that JPM has a color, colorful array of clients, So

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<v Speaker 2>that kind of says it all. Hannah Lovitt, thank you

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<v Speaker 2>so much for joining us. Hannah love It is a

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<v Speaker 2>Bloomberg News finance reporter. You are listening to Bloomberg Lostick

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<v Speaker 2>with us here. We've got more coming up right now.

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<v Speaker 1>This is Bloomberg Law with June Grosso from Bloomberg Radio.

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<v Speaker 2>This is Bloomberg Law. I'm Madison Mills in for June Grasso.

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<v Speaker 2>This week big acquisition news today, Nasdaq has agreed to

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<v Speaker 2>buy financial software maker Adenza from its private equity owner

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<v Speaker 2>and the US exchange operator's biggest ever deal. We're talking

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<v Speaker 2>ten and a half billion dollars. So Kat Doherty is

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<v Speaker 2>here with me to discuss. She's a Bloomberg News finance reporter. Kat,

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<v Speaker 2>great to speak with you. Talk to me about what

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<v Speaker 2>we need to know about this deal. What are your

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<v Speaker 2>sources saying today.

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<v Speaker 4>Well, everyone is talking about the size. Yes, it is

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<v Speaker 4>Nasdaq's would be biggest deal should it pass regulatory approval,

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<v Speaker 4>which they are expecting will come within six to nine months.

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<v Speaker 4>But the cost of this is not nothing. They're paying

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<v Speaker 4>for it with a combination of cash inequity. Toma Bravo,

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<v Speaker 4>the owner of Adenza, is going to be taking a

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<v Speaker 4>nearly fifteen percent steak in Nasdaq. That's going to be

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<v Speaker 4>among one of the biggest steaks of any Nasdaq investor group.

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<v Speaker 4>So that's something to look out for and I think

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<v Speaker 4>something I heard a lot of people ask about today.

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<v Speaker 4>And also they get a board seat. So there's a

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<v Speaker 4>lot of collaboration cross collaboration between Toma, Bravo and Nasdaq,

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<v Speaker 4>which is not unusual to see some pretty big players

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<v Speaker 4>in the finance markets come forward and collaborate in this way,

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<v Speaker 4>but we haven't seen anything that kind of matches it

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<v Speaker 4>to this scale. But the valuation is something that Nasdak's

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<v Speaker 4>going to have to think about in terms of the

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<v Speaker 4>debt that they're going to have to take on. They're

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<v Speaker 4>issuing some debt to pay for this acquisition. That's going

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<v Speaker 4>to increase their leverage. Now, they've taken on debt and

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<v Speaker 4>increase leverage before in previous acquisitions, and they've proven that

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<v Speaker 4>they can take down that leverage over time and through

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<v Speaker 4>cost synergies and using cash that they generate from these

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<v Speaker 4>deals to pay down debt. But that's still a question.

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<v Speaker 4>It's not necessarily a guarantee. So those are some of

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<v Speaker 4>the things that people are thinking about with this deal.

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<v Speaker 2>And is the market sense of this deal that it's

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<v Speaker 2>a little overpriced. Is that why we're seeing a dip

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<v Speaker 2>in the Nasdaq stock today?

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<v Speaker 4>Well, it is more, I believe than what Toma Bravo

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<v Speaker 4>paid for. There were two companies that they bought. They

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<v Speaker 4>were very well known, the first Calypso Technology, the second

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<v Speaker 4>Axiom sl They combined those two to create Adenza recently.

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<v Speaker 4>Uh and I believe that the cost that NASDAC is

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<v Speaker 4>paying for it is more. That being said, the rationale

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<v Speaker 4>that NASDAK has has given investors as to the price

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<v Speaker 4>is that they say, this is a going to be

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<v Speaker 4>a huge cash generator for them. They don't see a

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<v Speaker 4>problem with taking on the new debt and giving this

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<v Speaker 4>equity stake, but it is something that they're going to

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<v Speaker 4>have to manage and they're going to have to monitor

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<v Speaker 4>the potentially higher expenses when you take on a new

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<v Speaker 4>company like this, and it's just going to be another

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<v Speaker 4>it's going to be another really pain point for them

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<v Speaker 4>that they're going to have to get through so that

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<v Speaker 4>on the other side they can show investors, hey, here's

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<v Speaker 4>something that they're saying. There is a boon for our business.

0:13:19.000 --> 0:13:21.280
<v Speaker 4>They think of it as a great deal. It's just

0:13:21.320 --> 0:13:24.480
<v Speaker 4>whether or not investors view it in the same way.

0:13:24.920 --> 0:13:27.720
<v Speaker 2>Well, and they're saying that it's potentially a tailwind for

0:13:27.840 --> 0:13:30.040
<v Speaker 2>them because of banking pressures.

0:13:30.320 --> 0:13:34.760
<v Speaker 4>So it was interesting today on call with investors. There

0:13:34.840 --> 0:13:36.600
<v Speaker 4>was a question that was asked, I wish I had

0:13:36.640 --> 0:13:39.120
<v Speaker 4>thought of this question, which was a lot of Denza's

0:13:39.160 --> 0:13:42.920
<v Speaker 4>clients are banks and brokers, and the banking sector has

0:13:42.960 --> 0:13:45.600
<v Speaker 4>been under a lot of pressure recently. So they were

0:13:45.640 --> 0:13:48.400
<v Speaker 4>asking Nasdaq, is that an issue for this deal? Is

0:13:48.400 --> 0:13:50.760
<v Speaker 4>it something that complicates the deal in any way, And

0:13:50.880 --> 0:13:53.840
<v Speaker 4>their answer to that was no, In fact, this is

0:13:53.880 --> 0:13:56.320
<v Speaker 4>something that we see as an opportunity. The reason for

0:13:56.360 --> 0:14:02.720
<v Speaker 4>that being Denza's offerings specific deal with regulatory and risk management.

0:14:02.840 --> 0:14:07.840
<v Speaker 4>So if banks are facing further or more regulation and

0:14:08.040 --> 0:14:11.080
<v Speaker 4>risks to their business, they're going to engage and use

0:14:11.280 --> 0:14:16.880
<v Speaker 4>the software potentially in a new or increased way. So

0:14:17.160 --> 0:14:19.920
<v Speaker 4>Nasdaq is saying, great, this is something that we're going

0:14:19.960 --> 0:14:22.800
<v Speaker 4>to actually be able to help clients with rather than

0:14:22.840 --> 0:14:24.480
<v Speaker 4>have it be hurting their business.

0:14:25.880 --> 0:14:27.920
<v Speaker 2>All right, thank you so much for joining us. We

0:14:28.000 --> 0:14:31.280
<v Speaker 2>really appreciate it. This is Bloomberg Law. I'm Madison Mills

0:14:31.280 --> 0:14:34.080
<v Speaker 2>in for June Grasso throughout the week. Come back to

0:14:34.120 --> 0:14:35.960
<v Speaker 2>listen to us and we'll make you smarter on all

0:14:36.040 --> 0:14:38.600
<v Speaker 2>the legal news that you need to know. This is

0:14:38.600 --> 0:14:39.120
<v Speaker 2>Bloomberg