Michael Rubin & SBF’s Bahamas bromance

One note to start: This is the final DD of 2022. We’ll be back on Tuesday, January 10th after some R&R — but be sure to look out for a special edition of the newsletter in early January.

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Francesca Friday

Due Diligence reporter/producer

In today’s newsletter:

Michael Rubin is no longer an FTX fanatic

Michael Rubin is the ultimate networker. The man behind the Fanatics sports merchandise empire has quite the jet-setting life, as chronicled in this New York Times profile.

Rubin also spent time last year with the island nation’s most infamous resident, FTX founder Sam Bankman-Fried. A disclosure from the fallen crypto exchange’s bankruptcy counsel on Wednesday night revealed that FTX is an investor in Fanatics, a company that Sullivan & Cromwell represents.

DD has learned some detail about the relationship between the two. According to a person familiar with the situation, Rubin and SBF met in late 2021 while Rubin was building a vacation house at the Albany Resort, the posh community where FTX had set up shop.

Rubin put $10mn into FTX, a figure that has since been wiped out. FTX, however, put in a reciprocal $10mn into Fanatics, according to this person. The latter investment has worked out much better.

FTX’s $10mn was invested in an early 2022 fundraising that valued Fanatics at $27bn. Just weeks ago, that valuation rose to $31bn in another round that included the likes of Clearlake Capital, LionTree, SoftBank and Silver Lake Partners.

The crypto group’s Fanatics investment is now part of the FTX bankruptcy estate that the company’s new boss John Ray III, Sullivan & Cromwell and bankers at Perella Weinberg Partners are looking to monetise in order to pay off account holders.

Fanatics declined to comment on its relationship with FTX.

Rubin may be spending more time in the Bahamas, but SBF won’t be. After arriving in New York and being taken into federal custody on Thursday, a judge set a $250mn bond for him that requires his presence at his parents’ home in Palo Alto, California.

Two of his closest associates, Caroline Ellison and Gary Wang, also won’t be returning anytime soon. The pair have pleaded guilty to fraud charges and agreed to co-operate with US authorities.

How Adidas dropped the ball

The year is 2016. Kanye West’s album Fade is dominating the airwaves and drops of the rapper-turned-designer’s Yeezy sneaker collaboration with Adidas are selling so fast that merchants estimate only 0.25 per cent of hopeful customers will get their hands on a pair.

How the mighty have fallen. The rapper, who now goes by Ye, has come out as a Hitler apologist on an anti-Semitic tirade that has inspired other hateful language and acts. That prompted Adidas to cut ties with its most profitable business partner.

The end of the partnership has contributed to a 54 per cent drop in Adidas’ share price in the past year. But the retailer had been confronting deep-seated issues within its organisation long before its most recent crisis, the FT’s Eleanor Olcott and Olaf Storbeck report.

In interviews with 17 current and former executives, many of whom have left the company, who said outgoing chief Kasper Rørsted and its board had positioned Adidas poorly to weather the West storm, firing key personnel and becoming over-reliant on the Yeezy collaboration.

They also claimed the outgoing chief’s “management by fear” had traumatised staff and led to an exodus of talent.

Rørsted’s successor, longstanding Puma boss Björn Gulden, has now been tasked with confronting the widening gap between Adidas and its rivals.

The debacle has made clear the risks of becoming too dependent on a single partner. As Citi analyst Thomas Chauvet put it last month: “A whole Adidas brand reset is probably needed.”

Job moves

Dan Berkovitz, general counsel of the US Securities and Exchange Commission, will leave the agency at the end of January. Megan Barbero, currently SEC principal deputy general counsel, will take his place.

Stephanie Bruce, the chief financial officer of Abrdn, is planning to leave the asset manager in the coming months, according to Bloomberg, after what has been a challenging period for the group.

Tesla has sent its China boss Tom Zhu to the US to help address production engineering challenges in the region, fuelling speculation that he’s being primed for a bigger role as the electric carmaker’s CEO Elon Musk has been distracted with Twitter, per Reuters.

Smart reads

The ER elite A special room in New York University’s busy Manhattan emergency department is dedicated to two kinds of patients: those whose lives are on the line, and VIPs. The New York Times investigates allegations that the hospital gives preferential treatment to donors, trustees and their families.

India or bust As China’s once red-hot wealth market cools in the face of geopolitical tensions, a new gold rush has kicked off global private banks rush to hire advisers for India’s rich, Bloomberg reports.

People of interest From Sam Bankman-Fried to the crypto conwoman who went by the rap name “RAZZLEKAHN”, our colleagues at Alphaville look back on a year of fascinating characters.

And one FT film: the easy money era is over. FT journalists break down the next big threats to the global financial system.

News round-up

Guggenheim Partners financier Scott Minerd dies aged 63 (FT)

Former Crédit Agricole trader alleges racial bias at bank (Bloomberg)

Deloitte fined by UK watchdog over SIG audit work (FT)

JPMorgan’s credit-trading loss hinged on internal valuations (Bloomberg)

Toshiba’s preferred bidder to seal $10.6bn loan deal (Reuters/Yomiuri)

German regulator rebukes Standard Chartered over European operations 

TikTok admits tracking FT journalist in leaks investigation (FT)

US banks: mind the $690bn bond valuation gap (Lex)

Porsche and the decline of the German stock market (FT Opinion)