TikTok has stored the most sensitive financial data of its biggest stars — including those in its “Creator Fund” — on servers in China. Earlier this year, CEO Shou Chew told Congress “American data has always been stored in Virginia and Singapore.”



Over the past several years,&nbsp;thousands of TikTok creators and businesses around the world have given the company sensitive financial information—including their social security numbers and tax IDs—so that they can be paid by the platform.



But unbeknownst to many of them, TikTok has stored that personal financial information on servers in China that are accessible by employees there,&nbsp;Forbes&nbsp;has learned.



TikTok uses various internal tools and databases from its Beijing-based parent ByteDance to manage payments to creators who earn money through the app, including many of its biggest stars in the United States and Europe. The same tools are used to pay outside vendors and small businesses working with TikTok. But a trove of records obtained by&nbsp;Forbes&nbsp;from multiple sources across different parts of the company reveals that highly sensitive financial and personal information about those prized users and third parties has been stored in China. The discovery also raises questions about whether employees who are not authorized to access that data have been able to. It draws on internal communications, audio recordings, videos, screenshots, documents marked “Privileged and Confidential,” and several people familiar with the matter.



In testimony before Congress earlier this year, TikTok CEO Shou Zi Chew claimed U.S. user data has been stored on physical servers outside China. “American data has always been stored in Virginia and Singapore in the past, and access of this is on an as-required basis by our engineers globally,” he said under oath at a House hearing in March.



TikTok spokesperson Alex Haurek said in a statement that “we remain confident in the accuracy of Shou&#8217;s testimony.” ByteDance did not respond to a detailed request for comment. At publication time, neither company had answered basic questions about whether sensitive tax information of U.S. citizens is stored and accessible in China.



Over the last year, TikTok has been touting its plans to cordon off Americans’ data from China in a $1.5 billion undertaking called&nbsp;<a href="https://www.buzzfeednews.com/article/emilybakerwhite/tiktok-project-texas-bytedance-user-data" target="_blank" rel="noreferrer noopener">Project Texas</a>. That initiative has been central to negotiations with the Biden administration on a deal that would allow the wildly popular app to continue operating in the U.S., despite longstanding national security concerns about its Chinese ownership and the potential for the platform to be used&nbsp;<a href="https://www.forbes.com/sites/emilybaker-white/2022/12/22/tiktok-tracks-forbes-journalists-bytedance/?sh=5a6afb397da5">to surveil</a>&nbsp;or influence the 150 million Americans using it. But since those talks hit a snag late last year, with both FBI Director Christopher Wray and Treasury Secretary Janet Yellen speaking out about national security issues with the app, the Biden administration (through the Committee on Foreign Investment in the U.S.) has demanded that TikTok split from its Chinese parent company or face a possible ban.



“There’s ongoing litigation over TikTok that is not yet resolved,” Yellen, whose department leads CFIUS, said at a hearing in March. And many in Congress have cast doubt on Project Texas altogether: “I don’t believe that it is technically possible to accomplish what TikTok says it will accomplish through Project Texas,” California Republican Jay Obernolte told the TikTok CEO at the March hearing. “There are too many backdoors.”



<blockquote class="wp-block-quote">
“Even if TikTok was not a subsidiary of a Chinese company, this would be pretty alarming IT security malpractice.”Former White House and CIA national security lawyer Bryan Cunningham
</blockquote>



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Identity theft using stolen social security numbers is&nbsp;<a href="https://www.irs.gov/newsroom/taxpayer-guide-to-identity-theft" target="_blank" rel="noreferrer noopener">not uncommon</a>&nbsp;in the U.S., and the Chinese government&nbsp;<a href="https://www.nytimes.com/2020/02/10/us/politics/equifax-hack-china.html" target="_blank" rel="noreferrer noopener">has been accused</a>&nbsp;of stealing personal financial information from Americans before. One expert told&nbsp;Forbes&nbsp;this is precisely why TikTok’s mishandling of such information is troubling.



“Even if TikTok was not a subsidiary of a Chinese company, this would be pretty alarming IT security malpractice,” Bryan Cunningham, a former national security lawyer for the White House and CIA, told&nbsp;Forbes. He described tax records as some of the most sensitive data there is.



&#8220;It could be just bad IT practice, it could be they felt like they had a legitimate business need,” Cunningham said of TikTok. “But whatever the nuance of that turns out to be… if you store information in the PRC, you better assume that the intelligence services can have it if they want it. They may not target you, but boy, on the face of it, it&#8217;s highly questionable.”



TikTok and ByteDance did not respond to questions about how many people at the companies can access creators’ financial information, where those employees are located and whether there has been unauthorized access to this data. They also did not respond to queries about how long TikTok users and vendors’ payment data had been stored in China and whether it still is today.



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<h2 class="wp-block-heading">Raising regulatory alarms on both sides of the Atlantic</h2>



TikTok or ByteDance&nbsp;employees in China having access to American users and businesses’ sensitive financial records is potentially problematic for geopolitical reasons, particularly against the backdrop of intense regulatory scrutiny in the U.S.



Though there is no national privacy law in the U.S. to protect against the mishandling or misuse of personally identifiable information,&nbsp;<a href="https://www.congress.gov/bill/117th-congress/house-bill/8152/text" target="_blank" rel="noreferrer noopener">one top contender</a>&nbsp;introduced last Congress would require companies to clearly disclose in their privacy policies whether data they collect “is transferred to, processed in, stored in, or otherwise accessible to the People’s Republic of China” and other adversaries. And though a past Federal Trade Commission&nbsp;<a href="https://www.ftc.gov/news-events/news/press-releases/2019/02/video-social-networking-app-musically-agrees-settle-ftc-allegations-it-violated-childrens-privacy" target="_blank" rel="noreferrer noopener">settlement with TikTok</a>&nbsp;(then Musical.ly) dealt with a markedly separate set of issues—children’s privacy violations—the agency could take that order into consideration when evaluating the company’s conduct today.



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Jessica Rich, former director of the FTC’s Bureau of Consumer Protection, said in a case like this, the agency would likely consider whether the company had made false or deceptive statements about how it handles users’ information—in a privacy policy, for example—or if the handling of that information had created a real risk of harm. She would not comment specifically on TikTok and ByteDance.



TikTok’s policies suggest that it takes appropriate steps to protect its users’ data. Creators who join TikTok’s Creator Fund&nbsp;<a href="https://www.tiktok.com/legal/page/global/tiktok-creator-fund-terms/en" target="_blank" rel="noreferrer noopener">agree to</a>&nbsp;“all” TikTok policies, including&nbsp;<a href="https://www.tiktok.com/legal/page/us/privacy-policy/en" target="_blank" rel="noreferrer noopener">privacy terms</a>&nbsp;stating that “certain entities within our corporate group… are given limited remote access to information we collect” if it’s necessary for the platform’s operations. They also emphasize that “we use reasonable measures to help protect information from… unauthorized access.” (It does say TikTok may transmit user data to servers outside the U.S. for storage or processing, and that no data storage or transmission is guaranteed to be secure.)



Rich, the former federal regulator, said that if any company claims to be locking down access to information but then making it available to employees around the world who do not need it, the FTC could see that as a deceptive statement and grounds for a potential data security complaint. She also said that the agency generally views financial information and social security numbers as more sensitive than email addresses or phone numbers, and that it may scrutinize those data-sharing cases more aggressively.



<blockquote class="wp-block-quote">
“I would like everything to stay in the U.S.—like, I wouldn&#8217;t see why it would ever need to be stored on a China database.”TikToker and Creator Fund member Zack Fairhurst
</blockquote>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



TikTok’s storage of European creators’ bank information in China could also be problematic under Europe’s privacy law, the General Data Protection Regulation.



Even as TikTok launched&nbsp;<a href="https://newsroom.tiktok.com/en-ie/project-clover-ireland" target="_blank" rel="noreferrer noopener">Project Clover</a>—a Project Texas counterpart across the Atlantic—to safeguard the data of its European users, the Irish Data Protection Commission (TikTok’s lead regulator in the European Union) is already conducting&nbsp;<a href="https://www.dataprotection.ie/en/news-media/latest-news/dpc-launches-two-inquiries-tiktok-concerning-compliance-gdpr-requirements-relating-processing" target="_blank" rel="noreferrer noopener">two investigations</a>&nbsp;into whether the company has complied with GDPR. One of those probes is looking specifically at whether TikTok has unlawfully transferred European users’ personal data from the EU to China, and whether it was adequately transparent with users about how it was handling their information. Gabriela Zanfir-Fortuna, vice president for global privacy at the Future of Privacy Forum, said ByteDance tools storing European creators’ data on servers in China could be problematic for that reason.



&#8220;This is the sort of thing that would confirm there are transfers [of personal data] to China happening, so I&#8217;m sure they would be interested in knowing this,” she said of Ireland’s privacy watchdog. (Just last week, the body issued&nbsp;<a href="https://www.forbes.com/sites/siladityaray/2023/05/22/meta-fined-record-13-billion-for-violating-eu-privacy-rules/?sh=2eff164772c9">a record $1.3 billion fine</a>&nbsp;to Facebook parent Meta, one of TikTok’s biggest rivals, over its own data transfer issues.) GDPR also requires companies to restrict access to sensitive user data on a need-to-know basis, Zanfir-Fortuna added, raising questions about how broad access to these payment tools has been and whether it was necessary.



The Commission would not comment on its ongoing inquiry into TikTok except to say it expects a public update after this summer. TikTok’s&nbsp;<a href="https://www.tiktok.com/legal/page/eea/privacy-policy/en" target="_blank" rel="noreferrer noopener">policies for Europe</a>&nbsp;say “certain entities in our Corporate Group, located outside your country of residence (see&nbsp;<a href="https://www.tiktok.com/legal/transferee-countries" target="_blank" rel="noreferrer noopener">here</a>), are given limited remote access to this information” and that this access is “secure and only granted where necessary under strict security controls.” The link included (“here”) lands on a 404 error page.



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<h2 class="wp-block-heading">Creators reacts</h2>



TikToker&nbsp;<a href="https://www.tiktok.com/@maddzak?lang=en" target="_blank" rel="noreferrer noopener">Zack Fairhurst</a>,&nbsp;a member of its Creator Fund who participated in the company’s blitz on Capitol Hill this spring, told&nbsp;Forbes&nbsp;he had no idea his tax information and social security number might be stored in China. (TikTok brought some creators to Washington in March to raise awareness around&nbsp;<a href="https://www.forbes.com/sites/alexandralevine/2023/03/22/how-a-tiktok-ban-would-affect-creators-businesses-economy/?sh=3cbf8eb25608">the benefits of the app</a>.)



“It wouldn&#8217;t really make sense for it to be over there,” Fairhurst told&nbsp;Forbes. “I would like everything to stay in the U.S—like, I wouldn&#8217;t see why it would ever need to be stored on a China database. … I am actually surprised by that.”



Other creators recalled uploading social security and financial information into TikTok but told&nbsp;Forbes&nbsp;they were unfazed by the possibility that it’s stored in China because putting themselves out there online is par for the course for those who want to build audiences and careers through social media.



&#8220;There are so many more pressing issues in the U.S.,”&nbsp;<a href="https://www.tiktok.com/@kathrynanja?lang=en" target="_blank" rel="noreferrer noopener">Kathryn Cross</a>, a 24-year-old creator in the TikTok program, told&nbsp;Forbes. “My mom grew up in China, so I just know that the Chinese government is so stringent about maintaining a proper public figure, essentially, that they would never allow something like a Cambridge Analytica scandal to compromise their global position.”



“The benefit TikTok has brought to people&#8217;s businesses and lives, and the innovation behind the For You Page, to me seems so much more valuable than any minute chance that China&#8217;s storing our data… more so it seems like a foreign policy type of conflict,” she added.



Internet star and TikTok Creator Fund member&nbsp;<a href="https://www.tiktok.com/@yourrichbff?lang=en" target="_blank" rel="noreferrer noopener">Vivian Tu</a>—a former Wall Street trader who doles out financial advice under the handle “YourRichBFF,” said joining any app’s monetization program is “a calculated risk.”



&#8220;If you&#8217;re okay with being on TikTok,” she told&nbsp;Forbes,&nbsp;“you probably don&#8217;t care that much about your banking information being everywhere it&#8217;s stored.”



Emily Baker-White contributed reporting.

Trump Approves TikTok Takeover By Oracle And Walmart

TikTok Creators’ Financial Info, Social Security Numbers Have Been Stored In China

As bank failures rattle investors and test regulators, it&#8217;s time to rethink America’s financial system. One old solution, despised by regulators, might be just what the doctor ordered.



<abbr>N</abbr>estled on the&nbsp;second floor of a suburban office building in Fairfield, New Jersey, not far from Interstate 80 and just down the hall from an opthalmology center, are the offices of Financial Northeastern. Its chief executive, Jeff Zage, 60, could be one of the saviors of the troubled $23 trillion U.S. banking industry. Zage is a money broker, and for the past 38 years, his firm has specialized in underwriting certificates of deposits for needy banks. These deposits are generally bank-run-proof—they are not redeemable prior to maturity unless the deposit holder dies or becomes mentally incapacitated. Over the last 12 years, Zage’s small firm has quietly raised some $150 billion for banks small and large, connecting them with business owners, municipal treasurers and wealthy individuals eager to park sums of $250,000 or less in FDIC-insured accounts around the nation. Thanks to the Federal Reserve, interest rates on CDs maturing from three months to ten years are now above 5%. That means business is good for Financial Northeastern, which makes a small fee on each CD it brokers. But Zage repeatedly demurs when&nbsp;Forbes&nbsp;asks him for a photograph or even just a face-to-face meeting.



“I am a very unassuming individual,” he says. “I try to do my best to stay under the radar.”



Thirty-six years ago, it was a different story. Zage—then just 24 years old—his older brother Steven and their team of young cold-calling brokers were making millions providing funding to the nation’s ailing $1.2 trillion savings-and-loan industry in the form of high-rate CDs. A 1987&nbsp;Forbes&nbsp;article headlined “WE’RE THE LIFEBLOOD” pictured Zage popping out of the sunroof of his new car, his brother reclining on the hood. The story chronicled how regulators at regional Federal Home Loan Banks were calling brokers such as Financial Northeastern and Merrill Lynch to funnel billions to prop up zombie thrifts, mostly in Texas. Those S&amp;Ls had gotten into deep trouble after newly deregulated deposit rates soared by investing in commercial real estate, junk bonds and other risky assets.



When the dust settled, 747 savings-and-loans were shuttered and FSLIC, the insolvent government insurance fund backstopping the industry, was absorbed into the FDIC. The debacle cost U.S. taxpayers $124 billion, about $300 billion in current terms, or the equivalent of 2% of America’s 1989 GDP. Money brokers were blamed for worsening the S&amp;L crisis. Pundits called them a “cancer” afflicting the system because they peddled “hot money” that surged in and out of banks chasing the highest yield. In 1991, new regulations enacted by the FDIC made Zage’s bread-and-butter product, so-called brokered deposits, practically toxic to banks. Regulators warned against using them and increased FDIC insurance premiums for those who did. Today few of the nation’s 4,700 banks hold significant amounts of them.



But perhaps they should.



Silicon Valley Bank didn’t have a single brokered deposit on its books on March 9, the day depositors withdrew $42 billion in just 10 hours. Hot money? Sure—but it’s all hot these days. SVB’s $1 million-per-second deposit run was sparked by a handful of tweets. Dozens of fintechs, including Chime, Mercury and Robinhood, are more than happy to assist you with fast, frictionless money transfers. When Apple, backed by Goldman Sachs, announced in mid-April that it was offering an FDIC-insured savings account yielding 4.15%, it sucked in nearly $1 billion in four days. Non-banks, in the form of money market mutual funds like those offered by Vanguard and Fidelity, love hot money too. According to the Federal Reserve, over the last 13 months, $1 trillion in deposits has fled commercial banks for higher-yielding uninsured accounts.



Despite their pejorative “hot money” nickname, Zage’s FDIC-insured brokered CDs are far stickier than any of these bank savings accounts. Plus, there is strong evidence from a niche group of so-called industrial banks, which are in stellar financial condition while relying heavily on this funding, suggesting that this sort of heat is a stabilizing force. But brokered CDs alone won’t cure what’s ailing our nation’s banking system. The fact that after 40 years they continue to be stigmatized by regulators—and consequently shunned by banks—points to a larger problem. Bank regulation, with its multiple state regulators and three primary federal watchdogs—the Federal Reserve, the FDIC and the Office of Comptroller of the Currency—is stunningly inefficient, laden with political baggage and miles behind a quickly changing marketplace.



Part of the problem comes from clinging to old-fashioned banking ideals like “core” deposits, thought to be foundational to community banking and the soundness of our system. SVB and First Republic were far from the only banks caught flat-footed when the Fed hiked rates 10 times in the last year. According to FDIC call report data, 31 FDIC-insured banks with total assets of $30 billion are sitting on losses in their securities portfolios in excess of their tier 1 capital&nbsp;(see “Underwater on Main Street,” below).&nbsp;And that’s just the ugliest tip of the iceberg. Nearly 400 banks with combined assets of more than $3.7 trillion have losses amounting to more than half of their tier 1 capital. Virtually all these institutions are local community banks, most with assets of less than $300 million. Fortunately, few of these sick minnows are likely to have lots of uninsured deposits exceeding $250,000—or the external pressure of being publicly traded like Silicon Valley Bank and First Republic.



“In light of recent bank failures, the question is really not whether we need to rethink what a brokered deposit is or what hot money is, but what is a core deposit anymore?” says Jelena McWilliams, former chair of the FDIC and now a managing partner at Washington, D.C., law firm Cravath Swaine &amp; Moore. “Long-term, the community banking model will have to change. These small banks basically cannot survive unless they engage in fintech partnerships because it’s an easier and less costly business model to attract customers. But for whatever reason, the regulators in Washington are very averse to fintech.”



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<abbr>S</abbr>upport for&nbsp;community or “Main Street” banking dates to the founding of the republic, when populist Thomas Jefferson squared off against federalist Treasury Secretary Alexander Hamilton, an elitist who wanted to create a national bank. Jefferson believed it was unconstitutional and a threat to the young democracy, in part because it would concentrate funding in the big cities and away from small, developing agrarian communities. Hamilton prevailed in 1791 with the establishment of the first central bank, but in 1811, Congress failed to renew its charter. It wasn’t until 1863, when the Union needed to finance the Civil War, that the national banking system was created.



This historic bias enabled small-town banks to proliferate, and by 1929 there were nearly 26,000 banks in the U.S., one for every 5,000 Americans. The stock market crash and Great Depression sparked a blizzard of bank runs on these often-undercapitalized institutions: In the four years before the FDIC was established in 1933, nearly 6,000 U.S. banks and savings institutions failed, costing depositors $1.3 billion, about $31 billion in today’s dollars.



Ever since, the number of community or “Main Street” banks has been shrinking. There are currently 4,676 FDIC-insured banks, but on average 200 of them are merged out of existence each year. Dwindling numbers have done little, though, to weaken the strength and resolve of small banks’ primary lobbying group, the Independent Community Bankers of America (ICBA), which spent nearly $4.8 million lobbying in 2022, according to Open Secrets, including about $1.3 million in donations spread around Congress, the largest chunk to the House Financial Services Committee. The ICBA’s stated goal is to “keep money local and invest in communities.”



“They’re politically powerful because they’re on every single corner,” says bank consultant Mayra Rodríguez Valladares. “There’s actually rare bipartisan support for community banking.”



Adds former FDIC chairwoman McWilliams, “There is a strong sense in Washington that these small banks matter. Large banks don’t understand local conditions where a loan may have originated in the past based on ‘I’ve known your grandfather. He was a man of his word, and I trust that you’re going be the man of your word.’ [The ideal] is Norman Rockwell–esque.”



The ICBA asserts that big Wall Street banks are transactional, making decisions based on “predetermined credit boxes,” while community banking boils down to relationships. Of course, this is largely nonsense. Small banks use—or should use—precisely the same metrics in evaluating creditworthiness that larger ones do. There is no evidence of any bank of any size in the year 2023 making a loan because it “knew your grandfather.” On the flip side, in many ways, Silicon Valley Bank, with its $212 billion in assets, was practicing community banking.



“SVB was built exactly the way the regulators say a bank should be built: customer by customer, relationship by relationship. No hot money,” says bank regulatory expert Paul Clark of Seward &amp; Kissel. “Everything was ‘You want a line of credit from me, you keep your deposits here.’ Those are so-called core deposits.”



Moreover, because regulators were never especially precise in their definition of core deposits, except for the fact that brokered deposits should mostly be avoided, clever entrepreneurs and financial institutions over the years have figured out ways around the prohibitions and FDIC insurance limits.



In 2003 an Arlington, Virginia, company called IntraFi launched a deposit swapping service called CDAR (Certificate of Deposit Account Registry), which allowed banks to offer wealthy customers and businesses the ability to deposit up to $50 million. The big deposits are chopped up into $250,000 increments and placed at various FDIC-insured banks in IntraFi’s network. Banks that accept the deposits are then able to place their own over-the-limit deposits through the network.



“For me it’s being able to retain multigenerational customers that have accounts that will exceed the $250,000 limit,” says Jill Castilla, president of Citizens Bank of Edmond, Oklahoma, which has deposits of about $330 million, 18% of which are “reciprocal” thanks to IntraFi. “So now they don’t have to manually place those funds in different institutions to ensure they have coverage.”



Citizens’ $58 million in reciprocal deposits is not considered brokered by the FDIC but instead fall under the “core” deposit designation. Likewise, if you’re a bank that advertises your CD rates online using services like Bankrate, NerdWallet or Forbes Advisor, the high-rate deposits you bring in from across the nation typically qualify as “core.”



Then there are the multiple, and often confusing, brokered deposit “exemptions” granted by the FDIC to various banks, including those working exclusively with fintechs. FDIC-insured $1.8 billion (assets) Evolve Bank &amp; Trust of Memphis, Tennessee, provides banking services for large fintechs like Dave, Affirm and Mercury, but shows only 0.3% of its deposits are brokered.



Sourcing deposits outside your home market is apparently okay with regulators so long as you avoid broker-dealers like Zage, or UBS, Bank of America or Wells Fargo. Iowa’s Luana Savings Bank, a 115-year-old family-owned bank located in a town of 300 people amid thousands of acres of cornfields, found this out the hard way.



From 2016 to 2020, Luana’s assets more than doubled to $1.7 billion as its ambitious president, David Schultz, became one of Iowa’s biggest agricultural lenders. Luana and its six small branches were unable to attract enough local deposits to fuel its growing business, so Schultz connected with brokers that allowed him to fund his loans with out-of-market CDs with similar maturities. As assets climbed toward $2 billion, brokered deposits accounted for 60% of the total.



Luana’s operating stats have been exemplary, its return on equity averages 19% and it was a perennial winner of Des Moines–area “best bank” awards. Still, alarm bells sounded at the FDIC regional office, and in 2021, it and the Iowa Superintendent of Banks issued a cease-and-desist order claiming Luana was taking “excessive” risks and operating in an “unsafe and unsound” way. It also fined the bank $14.5 million and cut off its access to Federal Home Loan Bank loans. Schultz, who declined to speak to&nbsp;Forbes,&nbsp;told the&nbsp;Des Moines Register&nbsp;at the time that the charges were manufactured, and sued the FHLB.



Ultimately Schultz decided fighting regulators wasn’t worth it, so without admitting or denying the charges, Luana signed a consent order in 2022 and agreed to add independent directors to its board and reduce its reliance on non-core deposits.



<abbr>A</abbr>mong banks,&nbsp;the biggest users of brokered deposits are a small group of FDIC-insured institutions known as industrial banks. There are 24 of them, representing only $250 billion in total assets, but they are extremely well capitalized and profitable&nbsp;(see “Industrial Strength,” below).&nbsp;They are also despised by the ICBA and the Federal Reserve, and barely tolerated by their regulator, the FDIC.



Sometimes referred to as industrial loan companies (ILCs), these banks are FDIC-insured and -regulated, but their parent companies are typically commercial or financial institutions. The first ILC was formed in 1910 to make loans to industrial workers who couldn’t obtain credit elsewhere. Over the years companies like General Electric, Target and Goldman Sachs have owned ILCs. Today their owners include Harley-Davidson, Pitney Bowes, UnitedHealth Group, BMW, Square and USAA. Only a few states, including Utah, Nevada and California, can authorize their charters, and though they’re subject to the same rigorous FDIC application process and examinations as other banks, they’re exempt from Federal Reserve oversight because their parent companies, which are required to support their ILC with capital, aren’t bank holding companies.



Industrial banks can offer savings accounts, credit cards, loans and mortgages, but are prohibited from offering checking accounts or financing their parent company’s products. Pitney Bowes Bank, for example, doesn’t make loans to purchase its postage meter machines, but it can finance and manage shipping payments for its thousands of small-business customers. Industrial banks tend to be specialized and branchless, which is why many rely heavily on brokered certificates of deposit for funding, which they use to match asset maturities.



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One of the most profitable and well-capitalized banks in the nation, Nevada-chartered Beal Bank USA, is an industrial bank owned by Texas billionaire Andy Beal. It has $32 billion in assets and, as of March 31, 93% of its deposits were brokered. It’s currently offering one-year CDs yielding 4.65%.



Toyota Financial Savings Bank is another well-capitalized Nevada ILC, set up to provide savings accounts, mortgages and commercial loans to the company’s 35,000 U.S.-based Toyota and Lexus employees. Under its new chief executive, Mara McNeill, a former JPMorgan Chase auto finance executive—she graduated from the Air Force Academy in 1993 but also has a JD from Georgetown and a master’s in public policy from Harvard—its assets have grown from $1 billion in 2020 to nearly $6 billion, funded to a great extent by broker deposits, which currently stand at 58% of the total.



“It can be economically advantageous to have core deposits. You don’t have as much in fees from the FDIC,” McNeill says. “But at the same time, you’ve gotta pay for the salespeople to go out there and get those accounts. And so, you know, there’s a fee here and a cost there.”



Other successful but little-known industrial banks, all based in Utah, include Comenity, an $12 billion credit card lender; Nelnet, a $1 billion specialist in student loans; and Wex, a $6.5 billion bank offering gasoline charge cards to small and midsize fleets with discounts from refiners like Chevron and Exxon. Until a few years ago, $2 billion Medallion Bank specialized in financing taxicab medallions. But Uber and Lyft forced a hard pivot to lending for recreational vehicles and boats, and financing home contractors. Virtually all its funding comes from brokered deposits. “Our Deposits Don’t Run,” reads a headline on its website.



Industrial banks currently represent about 1% of all bank assets, but the ICBA apparently views them as a dire threat to community banking. In July 2005, when Walmart applied for an industrial bank charter, the ICBA helped orchestrate a tidal wave of thousands of alarming letters to the FDIC and Congress. Their message: Just as Walmart killed mom-and-pop retailing, an industrial bank charter would help it eliminate Main Street banks. In fact, efficiency-minded Walmart merely wanted to streamline credit card processing, saving money on bank fees, and would have been precluded from offering banking services directly to its customers.



The FDIC, under chairman Martin Gruenberg, ignored Walmart’s application. Then, a full year after the retailing giant submitted its forms, the FDIC announced a six-month moratorium on approving all ILC applications, ostensibly to “determine if any emerging safety and soundness or policy issues exist.” Walmart withdrew its application in March 2007, and that six-month moratorium wound up lasting 14 years, until Jelena McWilliams took over as FDIC chairperson and approved Nelnet and Square’s application.



“Martin Gruenberg does not like nontraditional banks. And so they just slow-walked the applications when they hit Washington,” says George Sutton, general counsel for the National Association of Industrial Bankers and Utah’s former commissioner of financial institutions. “Eventually it just goes into a black hole.” (The FDIC declined&nbsp;Forbes’&nbsp;interview requests.)



Banking crises are always about trust and stability, something traditional banks no longer have a monopoly on. Most people now trust Apple and Toyota more than their community bank. The next generation of banking customers care little about charters or regulatory turf wars and are savvy enough to know that hot money offering higher returns, whether from their local bank, fintech or broker, is smart money.

row of people to the bank teller cashier defocused background

Some Like It Hot: Can A Financial ‘Cancer’ From The 1980s Help Prevent Bank Runs?

The party is over for struggling retailers that enjoyed a pandemic-era boost of cheap loans and stimulus-driven spending.



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Retailers that have no business still being in business are starting to go out of business.



Unfortunately, it’s about time.



This year is on track to be the worst year for retail bankruptcies since 2020, with strip-mall mainstays like Bed Bath &amp; Beyond, Tuesday Morning, Party City and David’s Bridal all filing for Chapter 11 in the last several months.



“These are companies that have been in trouble for a while,” said Neil Saunders, managing director at research firm GlobalData. “It was almost a matter of when, rather than if, they went under.”



The spate of bankruptcies comes at a time when Americans have pulled back on discretionary spending and begun socking away more in savings as the cost of gas, groceries and other staples becomes more expensive, talk of a potential recession continues and major companies conduct layoffs. Consumer spending is watched closely since it accounts for more than two-thirds of the nation’s gross domestic product. Shoppers have shifted spending sharply in different directions over the pandemic, including pivoting away from categories like home goods after an early-pandemic buying spree.



However, while the economy isn’t helping and may be acting as a catalyst, the retailers who are teetering now have long had major problems. Retail spending remains “surprisingly robust” in some ways, said Saunders. More often a retailer’s downfall can be traced to shabby stores or an uninspiring online presence.



Plenty more retailers could go bankrupt before the year is over. The ones that look the most vulnerable to default include Rite Aid, Jo-Ann, Belk, At Home and 99 Cents Only, according to ratings companies Moody’s and S&amp;P Global. This watchlist skews toward specialty stores with exposure to the pressured home goods sector.



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The pandemic bought many retailers more time. Consumers spent freely, flush with cash from stimulus checks and unable to put it toward vacation or dinner and a movie. Retailers were also able to borrow money on the cheap.



“Covid masked some of the weak players,” said Steve Dennis, founder of SageBerry Consulting. “It staved off the reckoning.”



Now that the pandemic is over, at least officially, it’s back to reality and retailers are confronting the sins of the past: too many stores, too much debt and too few customers.



Retailers who loaded up on debt are having a harder time making payments as they watch sales and profits deteriorate. For instance, discount home goods retailer Tuesday Morning referenced its “exceedingly burdensome debt” in February when filing for bankruptcy for the second time in two years. Its net debt has increased tenfold, jumping from $23 million in 2019 to some $250 million last year. Sales during that time fell by 25%.



Christmas Tree Shops also cited its “burdensome liabilities” when filing for bankruptcy earlier this month. Its owner, Handil Holdings, listed liabilities of as much as $100 million in court documents.



Twelve percent of retailers now have a Triple-C rating from S&amp;P Global, meaning there’s a 50-50 chance that things get so bad they’ll default on their loans. That’s double the figure from last year and triple the year before.



“A lot of these companies were essentially zombie companies pre-Covid,” said Craig Ganz, an attorney at Ballard Spahr who has handled retail bankruptcies for several decades. “They were primarily surviving on debt, and now debt has become simply too expensive for them to afford.”



The Federal Reserve’s rapid rate hikes have made it much costlier for retailers to take on new debt, whether it’s to finance investments in growth areas or give themselves some breathing room, said Sarah Wyeth, who leads the retail and consumer sectors for S&amp;P Global Ratings.



“Any issuer that’s very stressed and needs to go to the market in the next year or so is going to be very challenged,” said Wyeth.



Meanwhile, the bills must be paid. Overhead is especially vexing for retailers stuck with large, lumbering brick-and-mortar fleets from an earlier era who aren’t drawing enough shoppers to cover the costs of paying workers, stocking shelves and keeping the lights on. The home furnishing sector is notorious for having too many stores, said Craig Johnson, founder of Customer Growth Partners, a retail research firm.



“The seeds of these companies’ demise was planted not just years ago, but decades ago,” he said.



By Lauren Debter, Forbes Staff

Netherlands Reimposes Partial Lockdown Amid Latest Covid-19 Wave

Plenty More Retailers Will Go Bankrupt This Year. The Only Surprise Is It Didn’t Happen Sooner.

The world’s most valuable startup does more than any other investment to put VCs on the Forbes Midas List, including its No. 1. But tens of billions in paper profits remain blocked by regulatory standoff without resolution in sight.



It’s the biggest venture capital profit haul that no one wants to talk about.



ByteDance – the Chinese parent company of social media app TikTok – is the world’s most valuable startup. Even at a valuation of $220 billion, down from a peak of&nbsp;<a href="https://www.bloomberg.com/news/articles/2021-08-02/china-specter-jolts-bytedance-s-backers-to-try-trimming-stakes?leadSource=uverify%20wall" target="_blank" rel="noreferrer noopener">$500 billion</a>&nbsp;in the secondary market in 2021, it’s not even close. (SpaceX, Elon Musk’s rocket company, slots in second at $140 billion.)



For its investors, some of whom backed the company when it was still valued in the millions, an eventual ByteDance public offering would mean billions, and even tens of billions of dollars, in profits, instantly vaulting their investments into the ranks of the top VC bets of all time. The company already does more to put investors on the Midas List of top venture capitalists than any other, even though the list prioritizes exits over unrealized returns in the rankings.



And in a rarity for venture capital, ByteDance’s investors are currently keeping very, very quiet with such a historic outcome still glimmering just out of reach. Forbes reached out to every 2023 Midas List member invested in ByteDance, including new list No. 1 Neil Shen of Sequoia China, a ByteDance board director, and No. 71 Anton Levy of General Atlantic, whose firm also holds a board seat. None agreed to speak on the record about the investment or the company’s prospects.



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<figure class="aligncenter size-large is-resized"><img decoding="async" loading="lazy" src="https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-1024x436.png" alt="" class="wp-image-58176" width="330" height="140" srcset="https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-1024x436.png 1024w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-300x128.png 300w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-768x327.png 768w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa-1536x653.png 1536w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/aa.png 1561w" sizes="(max-width: 330px) 100vw, 330px" /><figcaption class="wp-element-caption">(L-R) Adeyemi Ajao, Lauren Kolodny, and Steve Jang. CODY PICKENS FOR FORBES</figcaption></figure></div>


<a href="https://www.forbes.com/lists/midas/" target="_blank" rel="noreferrer noopener">The Midas List 2023</a>



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The reason, Forbes heard in several conversations with investors who asked to remain anonymous, as well as secondary market experts and analysts, is simple: TikTok. The social media app is hugely popular in the U.S., with 150 million users, including five million businesses, but outsized in controversy, too. In March, Forbes reported that the FBI and Department of Justice<a href="https://www.forbes.com/sites/emilybaker-white/2023/03/16/fbi-doj-investigating-bytedance-tiktok-surveillance-journalists/?sh=3c0efb77a6fc"> were investigating</a> ByteDance’s use of the TikTok app to surveil American journalists, including Forbes reporters. Other features, from a “heating” button that can<a href="https://www.forbes.com/sites/emilybaker-white/2023/01/20/tiktoks-secret-heating-button-can-make-anyone-go-viral/?sh=184f212e6bfd"> make posts go viral</a>, a library of “sensitive words” ByteDance<a href="https://www.forbes.com/sites/alexandralevine/2023/05/01/tiktok-bytedance-suppression-tool-trump-china-uyghurs/?sh=17df0706434c"> tracks on its apps</a>, to user data<a href="https://www.forbes.com/sites/alexandralevine/2023/03/21/tiktok-india-ban-bytedance-data-access/?sh=6ef55be62eca"> still accessible</a> in China years after its deletion, have helped make TikTok a political hot potato.



Several years after federal courts blocked the Trump administration from banning TikTok, some lawmakers and the Biden White House have resumed that call, with the government indicating that if ByteDance does not sell TikTok, the app will be banned. That uncertainty – and the looming role of the Chinese government, which has indicated that a sale is a non-starter – means that for TikTok’s venture capital investors, it’s best not to poke the bear. While some investors have unloaded smaller stakes and may continue to do so,&nbsp;Forbes&nbsp;has learned, Midas-making, billion-dollar-plus positions remain idling on the runway. And the secondary market – where ByteDance’s reduced $220 billion price tag has largely held up in recent weeks even as TikTok CEO Shou Zi Chew took a beating in a heated Congressional hearing – has ground mostly to a halt.



Board seat holders Sequoia and General Atlantic declined to comment. ByteDance did not immediately respond to a request for comment.



“With rising China-U.S. tensions, do ByteDance shares become an issue?” mused one ByteDance investor who asked not to be named. “That’s what we’re trying to figure out.”



Several years after federal courts blocked the Trump administration from banning TikTok, some lawmakers and the Biden White House have resumed that call, with the government indicating that if ByteDance does not sell TikTok, the app will be banned. That uncertainty – and the looming role of the Chinese government, which has indicated that a sale is a non-starter – means that for TikTok’s venture capital investors, it’s best not to poke the bear. While some investors have unloaded smaller stakes and may continue to do so,&nbsp;Forbes&nbsp;has learned, Midas-making, billion-dollar-plus positions remain idling on the runway. And the secondary market – where ByteDance’s reduced $220 billion price tag has largely held up in recent weeks even as TikTok CEO Shou Zi Chew took a beating in a heated Congressional hearing – has ground mostly to a halt.



Board seat holders Sequoia and General Atlantic declined to comment. ByteDance did not immediately respond to a request for comment.



“With rising China-U.S. tensions, do ByteDance shares become an issue?” mused one ByteDance investor who asked not to be named. “That’s what we’re trying to figure out.”



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<h2 class="wp-block-heading" id="h-from-early-bets-to-billions">From early bets to billions</h2>



If it weren’t for the politics, another ByteDance investor recently told Forbes, investors would be happy to talk about a “monster” business primed for the public markets. The company took in about $80 billion in revenue and $25 billion in gross operating profit, numbers separately reported by<a href="https://www.theinformation.com/articles/revenue-at-tiktok-owner-bytedance-rose-more-than-30-in-2022-topped-80-billion?rc=viwsit" target="_blank" rel="noreferrer noopener"> The Information</a> and<a href="https://www.economist.com/business/2023/04/13/bytedance-tiktoks-chinese-parent-reports-a-record-profit" target="_blank" rel="noreferrer noopener"> The Economist</a> in recent weeks and confirmed to Forbes by two sources. That would put it at roughly the same scale as Tencent, the public Chinese tech holding company that recently carried a market cap of about $470 billion. And it means that were ByteDance to go public, it would likely supplant Alibaba’s public offering, which raised $25 billion at a market cap of $231 billion in 2014, as the largest tech IPO ever.


<div class="wp-block-image">
<figure class="aligncenter size-full is-resized"><img decoding="async" loading="lazy" src="https://cms.forbesafrica.com/wp-content/uploads/2023/05/GettyImages-1244812372.jpg" alt="" class="wp-image-58177" width="490" height="327" srcset="https://cms.forbesafrica.com/wp-content/uploads/2023/05/GettyImages-1244812372.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/GettyImages-1244812372-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2023/05/GettyImages-1244812372-768x512.jpg 768w" sizes="(max-width: 490px) 100vw, 490px" /><figcaption class="wp-element-caption">Neil Shen. Photographer: Bryan van der Beek/Bloomberg via Getty Images</figcaption></figure></div>


When Shen first invested in ByteDance’s 2014 Series C funding round, his firm Sequoia China, the China-based fund manager for the global Sequoia brand, amassed a position of 10% of the company at a $465 million valuation. Shen could’ve gotten in for even cheaper a year before at a $60 million price tag,&nbsp;<a href="https://www.theinformation.com/articles/how-sequoias-neil-shen-built-a-china-powerhouse?rc=viwsit" target="_blank" rel="noreferrer noopener">but balked</a>. He’s since put more money into the company in most subsequent funding rounds, excluding one led by SoftBank in 2018.



Sequoia’s global growth funds also invested later into ByteDance; the firm purchased additional shares through secondary sales in 2020. Add it all up, and today Sequoia holds just over 10% of ByteDance still, per a source with knowledge – a position valued on paper at more than $22 billion. Shen and Sequoia declined to comment.



Another firm, Susquehanna International Group, reportedly holds an even bigger stake. SIG first backed ByteDance in 2012, and invested alongside Midas List No. 54 Yi Cao of Source Code Capital in two subsequent rounds before Shen. SIG holds about 15% of ByteDance,<a href="https://www.theinformation.com/articles/the-tiktok-investors-with-the-most-to-lose-from-a-u-s-ban?rc=viwsit" target="_blank" rel="noreferrer noopener"> per the report</a>. SIG isn’t considered for the Midas List because it’s not strictly a venture firm. It didn’t respond to a request for comment.



Among VCs, other Midas List investors with ByteDance stakes include No. 10 Hans Tung of GGV Capital, No. 20 Scott Shleifer of Tiger Global, No. 37 Marc Stad of Dragoneer Investment Group and No. 71 Anton Levy of General Atlantic.



Several of those firms got into ByteDance indirectly through Musical.ly, a lip-syncing app acquired by ByteDance in 2017. Qiming Venture Partners, whose former partner JP Gan made the 2022 Midas List, sold its position in 2019 at a $95 billion valuation, according to data from startup tracker PitchBook, pocketing $113 million. GGV, another Musical.ly backer, sold much of its stake along the way, according to a source. Qiming and GGV didn’t respond to requests for comment. (The U.S. government began investigating the sale in 2019; in 2020, President Donald Trump declared the sale invalid by executive order, but the order was overturned in court.)



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“People have sold quite a bit, and they’re debating selling more,” said one investor with knowledge of the thinking inside several ByteDance-holding firms. Firms with the largest stakes, or recent ones, including SIG, Sequoia, General Atlantic and Coatue, which invested in 2021, have mostly stood pat, according to three sources; Sequoia, in particular, hasn’t ever sold a single ByteDance share. “For the major shareholders, it would be hard for them to sell,” added one of the sources. All of the firms declined to comment.



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<h2 class="wp-block-heading">ByteDance shares feel the chill</h2>



ByteDance shareholders&nbsp;who do look to sell face a secondary market also spooked by Washington’s saber-rattling. Some deals are happening – SIG and SoftBank reportedly sold a $100 million-plus block of shares in March, per PitchBook – but not at the billion-dollar scale that would move the needle for ByteDance’s larger shareholders.



One point of debate is ByteDance’s fair price. Mutual funds AIG, Fidelity, BlackRock and T. Rowe Price still mark the company at share prices that imply a valuation range of $260 billion to $320 billion. Notice, a data provider that tracks bids and offers for secondary shares, estimates a real-time price of about $180 billion, similar to ByteDance’s December 2020 funding round. Notice shows a number of open buy and sell orders for ByteDance, with an order book totaling more than $3 billion in potential trade interest. But Notice has no record of any of those bids leading to trades, unusual for a big company with such interest, said Chuck Taylor, a Notice senior vice president. “It’s safe to say that many of the older indications of interest are not active,” he added.



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“Relative to other tech companies, it seems to be trading pretty cheaply, but there are these dark clouds.”
</blockquote>



Glen Anderson, a broker-dealer of ByteDance shares at Rainmaker Securities, said that investors continue to express interest in ByteDance at a $220 billion to $225 billion market cap price range, while sellers express a willingness to unload at a $235 billion to $240 billion range. “Pretty much all” of those bids and offers are in the ballpark of $50 million to $100 million positions, Anderson said. But the sellers are typically bundling a bunch of smaller stakes together, he added, not offering shares from one shareholder on ByteDance’s cap table.



“We’ve been surprised that, with all the noise in Washington, that marketplace hasn’t moved much in price,” Anderson said. Still, he pointed out that these numbers are half the value of 2021 transactions that implied a $400 billion-plus market cap, with the drop already factoring in regulatory uncertainty of a potential TikTok ban. ByteDance holders would hope to avoid the fate of investors in Juul, Anderson noted, the e-cigarette company that was ultimately whacked by regulators and saw its valuation written down 98% by acquirer Altria.



“If there were no regulatory risks for ByteDance, you would see a rally,” Anderson added. “Relative to other tech companies, it seems to be trading pretty cheaply, but there are these dark clouds.”



For Midas ByteDance backers, a brisk secondary market wouldn’t do more than alleviate pressure from potential limited partners looking for the funds they backed to return some cash. The big outcome remains an IPO, with or without the sale of TikTok. One ByteDance investor argued the ideal outcome would be for U.S. politicians to, having made noise on the issue and earned talking points, quietly move on from a potential ban. Then, ByteDance could consider a dual listing in the U.S. and Hong Kong, for maximum shareholder profits.



Failing that, the next best option for investors would be a sale of TikTok’s global business, opening the way for them to hold stakes in ByteDance and TikTok as separate entities — which could mean separate domestic IPOs. “Quite a few elements” of Congress would be sympathetic to a divestiture if it was done in the right way to address various national security concerns, said Jacob Helberg, an investor author who was appointed the commissioner of the United States-China Economic and Security Review Commission by House Speaker Kevin McCarthy in 2022. (He added he’s skeptical of it doing so.)



Such a sale would have to clear China’s own laws around the export of technologies, Helberg said. One ByteDance investor agreed such a sale appeared unlikely at present for that reason. “I think it would be best for them to sell, but the Chinese government isn’t allowing them to do that,” the source said. “TikTok has access to models and algorithms they wouldn’t want shared.”



If no deal or truce can be brokered, investors would face a worse scenario: TikTok banned in the U.S. and other countries, and ByteDance’s business entrenched around China. Even then, regulatory clarity could set a path for a public offering in China, another path to an exit. “A ban would likely catalyze going public in Hong Kong in our opinion,” Wedbush analyst Dan Ives said in an email.



That speaks to the real worst outcome for investors: no outcome at all. So long as TikTok remains in regulatory limbo, so do the exit scenarios for VCs. Their paper billions are enough to help with Midas status. But they can’t be banked yet.



“The investors I know are more nervous not about whether their investments will be liquid, but whether they’ll be able to repatriate those funds back to the U.S.,” said Helberg. “In the event of a geopolitical standoff over Taiwan, for example, you’d have to be completely delusional to assume that you’re going to be able to repatriate large amounts of funds in either direction. Capital flows would lock down.”



That’s why, despite ByteDance’s already outsized role in their portfolios, one investor laughed when asked why their peers wouldn’t talk about their investment on record. “That would be a great way to raise your hand for attention from the Chinese government, or a random U.S. lawmaker,” they said. “If not for the politics, we’d be shouting this deal from the rooftops.”



By Alex Konrad, Forbes Staff

In this photo illustration, a ByteDance logo is seen on a

For Top VCs, ByteDance’s Historic Windfall Remains A $220 Billion Mirage

These coins are designed to protect stablecoin holders from inflation. But they are complicated and it’s not clear whether they will actually work.



Stablecoins are digital tokens created to mirror the value of hard currencies like the U.S. dollar. They are critical for liquidity in the $1.2 trillion crypto market because investors need a steady, predictable place to park cash, in part because bitcoin, which will swing as much as 10% in a single day, has largely failed as a store of value. There are $120 billion in stablecoins outstanding. Unfortunately, their history is anything but stable.



In May 2022, TerraUSD, a stablecoin dreamed up by a Stanford-educated South Korean programmer named Do Kwon, famously collapsed because its value was based on an algorithm that proved to be unreliable in the face of an asset run. More than $45 billion in market value evaporated in a single day setting off a crypto market plunge. After being on the lam for nearly a year, Do Kwon was recently arrested in Montenegro. Then, there is the world’s largest stablecoin issuer Tether, which has $80 billion outstanding, but has long avoided even the most basic disclosures (like where it is located) and has been in trouble with regulators numerous times. On several occasions Tether’s U.S. dollar coin (USDC) has “broken the buck” and dipped below $1.00 in value.



Even the most regulatory compliant and transparent stablecoin, Circle’s USD Coin (USDC), which has $30 billion outstanding, has disappointed investors. When Silicon Valley Bank collapsed on March 10, USDC’s Boston-based issuer Circle admitted to having $3.3 billion on deposit at the bank, mostly uninsured. The price of USDC lost its peg, nosediving to $0.88 cents on March 11.



But stablecoins are still essential for serious players in the digital asset world, and hope springs eternal in crypto, so a new product has hit the market called promising an inflation-adjusted version of stablecoins. Dubbed “flatcoins” these new tokens are designed to to maintain purchasing power parity with a basket of goods by keeping up with inflation.



So far only about $100 million in flatcoins have been minted but with inflation stubbornly stuck at 4.6%, demand for these novel tokens is growing. Already Coinbase is actively looking to seed flatcoins on its new Ethereum Layer 2 blockchain Base.



“We are fascinated by the deep thought we’re seeing in decentralized stablecoin design and are particularly interested in ‘flatcoins’ – stablecoins that track the rate of inflation, enabling users to have stability in purchasing power while also having resiliency from the economic uncertainty caused by the legacy financial system,” wrote Coinbase in a recent post.



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Flatcoins are the brainchild of former Coinbase Chief Technology Officer Balaji Srinivasan and an Iranian born programer Sam Kazemian, who came up with a stablecoin protocol named Frax in 2021, and an inflation tracking index called Frax Price Index (FPI).



“The term flatcoin was basically meant to signify by me and Balaji that it stays flat to a standard of living, &#8221; says Kazemian who notes that his new flatcoin would be partially backed by collateral like USDC, and partially “stabilized” algorithmically.



Here are the basics mechanics of the new inflation-protected stablecoins. The first thing the Frax programmers set out to do is identify a targeted standard of living to track. Kazemian built a feed with a blockchain data provider called Chainlink to publish each month’s CPI from the Federal Reserve’s Bureau of Labor and Statistics (BLS) onto the Ethereum blockchain. With the current 12-month trailing inflation rate at 5%, Frax has a set of smart contracts programmed to automatically conduct algorithmic trading with a goal of profiting enough to match the monthly inflation print sent from Chainlink.



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In theory, this would mean that if a single tether or USDC is still worth $1.00, in a 5% inflation world an FPI would be redeemable for $1.05 of collateral. In order to earn the necessary amounts to cover the inflation premium, Kazemian’s team invests collateral in DeFi lending protocols such as Aave and Convex, which primarily focus on stablecoin markets. These DeFi protocols earn yield for letting borrowers access their tokens. These returns then become available for FPI minters to withdraw. However, FPI is run by a Decentralized Autonomous Organization, which could make changes to its risk parameters in the future.



If this sounds complicated and risky, it is, especially relative to simply owning a stablecoin like USDC and simultaneously hedging with something like a gold ETF or even Treasury Inflation Protected Securities (TIPS), where the U.S. government effectively covers the inflation risk.



Even more complicated is another flatcoin called Nuon. Rather than simply matching the BLS’ inflation reading, it joined up with a sister company called Trustflation to produce real-time inflation data based on a proprietary methodology. For instance, while the BLS inflation has eight main categories: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services, Trustflation has 12. Additions include clothing/footwear and alcohol/tobacco. The company also weights categories differently than the BLS and pulls in data real-time through service agreements with various providers instead of just relying on monthly updates.



“When we studied inflation we realized that it was calculated by 477 people on a monthly basis in a nebulous fashion,” says Trustflation and Nuon CEO Stefan Rust. “We decided to use a developer approach, take the same metrics, pull it from API&#8217;s, and have it updated in real time.”



While no one would argue that the collection and indexing of official inflation data doesn’t have numerous flaws, including an antiquated monthly production schedule, Trustflation’s Moneyball-esque approach to calculating real time inflation data does not come without drawbacks.



“When inflation is between 1.5%, and 2.5% per annum, it&#8217;s probably a bit of overkill, but when topline inflation is 8% to 9% those numbers may be meaningful on a day-to-day basis,” says Peter C. Earle, an economist at the American Institute for Economic Research. “I think it&#8217;s interesting to capture daily or intraday inflation data, but I also think there&#8217;s a lot of statistical noise.”



That noise could become deafening if the data feeds which determine prices and return targets , known in the crypto world as oracles, become corrupted. Crypto forensics firms report that so called oracle manipulation attacks cost investors $362 million last year. It is not impossible to foresee a scenario where an oracle gets manipulated to force one of these platforms to employ a riskier trading strategy than anticipated.



But data collection is not the only worry flatcoin buyers need to worry about. Behind Nuon’s inflation-protection guarantee is a complicated and potentially risky proposition. When an individual “mints” Nuon, he must deposit ether in its protocol, which then automatically buys the same amount of Nuon on the open market and deposits it in a DeFi protocol such as Uniswap or Pancakeswap. Income generated from this deposit, known as “yield farming,” is added to a user’s collateral position (which is the original ether) essentially as an “insurance.” Thus unlike FPI, nuon positions are overcollateralized &#8211; for instance a user must deposit $1.30 worth of ether to mint $1 of nuon.



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So far both FPI and nuon are having trouble tracking inflation (see charts). According to CoinGecko, FPI is currently priced at $1.08, but in its almost 12 months in existence it has traded as high as $1.18 and as low as $0.92, which would imply that in the last 12 months, inflation has spiked as high as 18% and below 1%. Nuon has dramatically outperformed inflation in its short existence; it only launched in March. Right now it is priced at $1.24, but it has been as high as $1.44.



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Ifflatcoins are meant to be the next evolution of digital “safe money&#8221;, stablecoin’s biggest player’s have yet to sign on. Circle, which issues USDC, has no plans to issue a flatcoin. Circle already has more than $25 billion in short Treasury bills backing its USDC tokens, but it is precluded from buying TIPS, because they are not issued in durations shorter than five years. Tether did not respond to requests for comment.



Flatcoins are so new they do not yet appear in any of the current stablecoin regulation bills circulating around Capitol Hill. The bi-partisan draft introduced in April proposed a ban on new algorithmically derived stablecoins such as TerraUSD/LUNA, where the stablecoin was backed by a sister token. Flatcoins use computer algorithms to derive their valuations, however, in their current incarnation do not fit neatly into the bill’s specific description. Still, any new stablecoins would have to be issued by a licensed entity at the state or federal level, so these products would need a bank backer if they expect to ever go mainstream.



Rust says that there are no restrictions on users in the U.S. from minting Nuon right now. “I guess, they are in a bit of a gray zone [with regards to how flatcoins fall under securities regulation]&#8230;At the moment, all the indications are that stablecoins pegged to the dollar or euro will fall under some regulation.”



Forbes called various legislators and regulators involved with the recently proposed stablecoin legislation to ask about flatcoins but most hadn’t even heard of them yet. Said Representative Brad Sherman (D-CA), a noted crypto critic, “We already have something like that. They’re called TIPS.”



By Steven Ehrlich, Forbes Staff

Mid-section of young Asian woman using smartphone in city at night, against illuminated street lights bokeh, working with Bitcoin technologies, investing or trading Bitcoin on cryptocurrency. Business on the go

Beware Of Flatcoins, Crypto’s Inflation Busting Fad

Kazadi emigrated to South Africa as a child from DR Congo and built a digital marketing agency in his adopted country. In early May last year, the 29-year-old died under murky circumstances.



On April 28, 2022, Christian Kazadi was enjoying a sunrise safari in Botswana. Sporting a corduroy fleece jacket, shorts and white sneakers in an Instagram post from that day, Kazadi smiles as he leans back on a jeep, calling it a “bucket list experience.”



The 29-year-old founder of Johannesburg, South Africa-based digital marketing agency Click Media was in Botswana to attend the first ever&nbsp;Forbes&nbsp;Under 30 Africa summit. It was a professional milestone for Kazadi, who had launched Click Media in 2016 with the last $30 in his bank account and bootstrapped it into a thriving business that ran social media campaigns for clients ranging from ESPN and Adidas to the National Basketball Association and KFC. Kazadi, who had yet to appear on&nbsp;Forbes’&nbsp;30 Under 30 list, was thrilled to have been awarded a spot at the conference.



But that Instagram <a href="https://www.instagram.com/p/Cc45W7Cq0CC/">post </a>was his last. Four days later, he was found dead in police custody 1,100 miles away in Kinshasa, the capital of the Democratic Republic of the Congo.



A year later, Kazadi’s mysterious death remains unsolved. His family is still trying to piece together what happened to him between April 30—when he was set to return to South Africa—and May 2, when he died in Kinshasa. Investigations in South Africa and DR Congo are at a standstill, and no one—not the airport officials in South Africa that denied his entry nor the Congolese police that may have been involved in his death—has provided any answers.



“He never made it back home from the&nbsp;Forbes&nbsp;event,” says Patrick Kazadi, Christian’s younger brother and cofounder and CEO of Click Media. “[We need] answers so the family can finally finish the grieving process and put the people who did this to justice.”



During his brief time in Botswana, Kazadi’s energy and entrepreneurial spirit made him stand out among his peers. &#8220;Even those who met him over the few days of the summit will convey how deeply they were touched by him,&#8221; says Pholo Kimbuende, a senior management consultant at consulting firm Guidehouse, who met Kazadi at the&nbsp;Forbes&nbsp;Under 30 event. &#8220;The future just looked so bright, and the circumstances around his death were just utterly devastating.&#8221;



The mystery began on April 30, when Kazadi’s flight from Botswana landed in Johannesburg at 10:45 am. He wasn’t allowed to enter South Africa, despite having lived in the country since 2001 and possessing a valid work visa that ran from 2020 to 2023.&nbsp;Forbes&nbsp;spoke to multiple friends and family members of Kazadi who confirmed he had previously traveled from South Africa to other African countries before and had never had any issues returning, although it is not entirely uncommon for immigrants to have difficulties at the South African border.&nbsp;Forbes&nbsp;also called and spoke to several officials at Johannesburg’s O.R. Tambo International Airport, but they didn’t provide any information on Kazadi and instead referred questions to South Africa’s Department of Home Affairs. Home Affairs suggested that the family file a public records request, which they did but have yet to receive a response.



Kazadi was then made to book a flight to Kinshasa, DR Congo the following day. He arrived just past midnight on May 2. A Congolese citizen, Kazadi was born in the country but hadn’t been back since leaving with his family in 2001, when they emigrated to South Africa to seek asylum as refugees.



<blockquote class="wp-block-quote">
“There’s foul play at hand. He was in Congo for less than 24 hours and he was murdered.”
<cite>Patrick Kazadi</cite></blockquote>



Later that day, a bizarre video appeared online, showing Kazadi behaving erratically at a funeral in Kinshasa. The video appears to show Kazadi getting inside the casket with his headphones on and shouting “Guelor,” the name of the deceased person at the funeral—who Kazadi apparently did not know, although Guelor happens to be the name of one of Kazadi’s younger brothers. People then appeared to surround him and drag him away from the casket. Kazadi was arrested at the funeral and held in a detention center, where a family friend went to check up on him on the night of May 2.



The next morning, Kazadi was dead. “There’s foul play at hand,” says Patrick. “He was in Congo for less than 24 hours and he was murdered.”



Photos and videos provided by Kazadi’s family and seen by&nbsp;Forbes&nbsp;show Kazadi lying on what appears to be a road, shirtless and with deep cuts and welts on his head, arms, chest and feet indicating that he may have been tortured. In one of the photos, a Congolese policeman or soldier is seen standing in the background.



A member of the family that was hosting the funeral, who had urged the police to arrest him at the time, was called into the police station about a week after his death and gave the police her phone number. When they tried to get in touch with her in the following days, the police told Kazadi’s family that the number was disconnected.



Kazadi’s family told Forbes that the police officers who arrested him were briefly detained in May last year as local authorities investigated what happened, but no charges have been filed. Unfortunately, death at the hands of the police isn’t uncommon in DR Congo. 133 people died in detention in the country in the first six months of 2022, according to the<a href="https://www.state.gov/wp-content/uploads/2023/03/415610_CONGO-DEM-REP-2022-HUMAN-RIGHTS-REPORT.pdf" target="_blank" rel="noreferrer noopener"> United Nations Joint Human Rights Office.</a>



A year after Kazadi’s death, the investigation has gone nowhere. Captain Parfait and Colonel Honoré of the Congolese National Police, the officers in charge of the investigation in the Matete district of Kinshasa, have told the Kazadi family’s lawyer that the case file for the investigation has gone missing. Neither responded to questions from&nbsp;Forbes&nbsp;about the status of the investigation.



“If it was the police that murdered him, of course they would get rid of the docket,” says Patrick. “The court case hasn’t even started because they currently can’t locate the docket file.”



In South Africa, Kazadi’s mother submitted a public records request to the Department of Home Affairs last July for information on why he was denied entry into the country. Under South African law, government agencies must respond to requests within 30 days, with the option of a single extension of no more than 30 additional days. But 296 days after the family initially submitted its request—and despite being repeatedly contacted by both Forbes and Kazadi’s family over the course of several months—the ministry has yet to provide an update.



Still, asylum seekers and immigrants with visas often face harassment from South African authorities. In its<a href="https://www.state.gov/wp-content/uploads/2023/02/415610_SOUTH-AFRICA-2022-HUMAN-RIGHTS-REPORT.pdf" target="_blank" rel="noreferrer noopener">&nbsp;2022 human rights report on South Africa</a>, the U.S. State Department wrote that “security forces arbitrarily arrested migrants and asylum seekers, including those with proper documentation, often because police were unfamiliar with migrant and asylum documentation.&#8221;



The lack of progress on the investigations has also resulted in plenty of conspiracy theories online, with YouTube videos viewed more than a million times speculating that Kazadi was drugged or part of a cult. “They have a lot of incorrect facts,” says Patrick. “A lot of people in Congo don’t know what is going on.”



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Ever since he arrived in South Africa at age 9 in 2001, Christian Kazadi worked hard to improve his life. He emigrated to Johannesburg with his mother and younger brothers to join his father, Samuel, a pastor and IT teacher who had already been living there for two years. Tragedy struck in 2007 when Samuel died while on a business trip to DR Congo, leaving the family without a breadwinner. (The cause of death isn’t known.)



The local church raised money to pay for the family’s rent, and his mother started selling clothes and toys at a flea market. But his father’s death forced Christian—then just 15 years old—to help provide for his family. He sold snacks at school during the week and packed meat at a grocery store on the weekends with his younger brother Patrick. Eventually he convinced the store to hire his mother as a cleaner, so she could stay closer to home instead of traveling to sell goods at different markets.



“It was nothing like close to minimum wage, but it was constant,” says Patrick. “That’s what started Chris’ mentality for entrepreneurship and hustling.”



Those wages helped them move to a larger house in 2011, where the family of five shared one room and subleased the other three rooms to make extra money. Chris was also a strong athlete in high school, placing in national competitions for track and field and basketball.



“We would sit at home and cut boxes and stack them up and put them as soles in our shoes,” says Patrick. “He would walk five kilometers to the closest court and play ball.”



Kazadi’s dream was to play professionally in the NBA, and he wrote in his application for the&nbsp;Forbes&nbsp;Under 30 event that he won a scholarship to play college basketball in New York after graduating from high school in 2012—but his family couldn’t afford to pay for his trip to the U.S.



There also wasn’t enough money for Chris to attend college at home, and they couldn’t apply for government scholarships that were reserved for South African citizens. Instead he kept working at butcheries, making about 300 rand—roughly $30 at the time—in tips on a good day and doing other odd jobs like frying meat. He also landed an unpaid internship managing social media for South African professional basketball player KP Ndlovu that year, running the Facebook, Twitter, Instagram and YouTube accounts for his company Loqdown Productions, which organizes basketball tournaments for young players in Johannesburg.



<blockquote class="wp-block-quote">
“Chris was a warrior and a soldier. I’m so proud of what he did and the legacy and empire he built and left behind.”
<cite>Joe Arrangement</cite></blockquote>



Kazadi’s luck started to turn the following year, when South Africa launched the professional Basketball National League (BNL). His work for Ndlovu caught the attention of FX Productions, a small marketing agency that managed social media for the BNL. He got hired to create social media content for the league, earning enough money to support his family and allow his mother to quit her cleaning job.



By January 2016, Kazadi was ready to strike out on his own. Against his mother’s wishes, he quit his job to take advantage of his own connections with the league and its teams to launch his own marketing firm. As an asylum seeker at the time, he couldn’t register the company himself. So he relied on a South African friend and used his entire savings—$30 at the time—to register the new company, which he named Click Media Productions.



His first idea was to host basketball tournaments, using his connections at the BNL to convince brands to sponsor his events. But the costs of organizing them—paying for kits, referees and venues—added up, leaving Kazadi in debt. So he turned back to focusing on social media, eventually making enough money to pay back the debt.



By 2017, the firm had grown enough that it was hosting regular tournaments. The first big break came that year, when Click Media handled digital marketing for the NBA Africa Game, which brought NBA stars like Dirk Nowitzki and Luol Deng to play in Johannesburg.



That growth allowed him to make his first hires to manage the firm’s new clients, which began to sign long-term contracts with Click Media. “This was my first official job, and it&#8217;s all because of Chris,&#8221; says Kaymo Moeti, who worked as a social media manager at Click Media from 2017 to 2018 and now runs marketing for a hip hop festival. “Everything that I learned, I learned from him. He&#8217;s the one that really taught me what I knew to help me get those opportunities.&#8221;



Click Media worked on the next NBA Africa Game in 2018, and the exposure helped put the company on the map, leading to new social media campaigns for clients ranging from ride-hailing app Bolt to rapper Lil Yachty. That same year, he obtained a South African work visa through Click Media. In December 2021, the company was named the best digital marketing agency in Johannesburg at the MEA Business Awards, organized by MEA Markets, a business publication focused on the Middle East and Africa.



&#8220;Chris was a warrior and a soldier,&#8221; says Joe Arrangement, a musician and music promoter who worked with Kazadi and Click Media. &#8220;I&#8217;m so proud of what he did and the legacy and empire he built and left behind.&#8221;



In March 2022, Click Media ran a social media campaign for cognac brand Hennessy and the NBA at a basketball court in Zoo Lake, Johannesburg. In an Instagram post from the video shoot, Kazadi hyped it up for his followers: &#8220;We got something really exciting coming to Zoo Lake soon,&#8221; he wrote. &#8220;With some of your favorite celebrities.&#8221;



Two months later, he was gone.



Click Media is now run by his brother Patrick, who wants to carry Christian’s legacy forward and keep growing the company until it achieves his vision of becoming the top digital marketing agency in Africa.



&#8220;As the CEO of Click Media, with the good God&#8217;s grace and blessing, I will complete that which we started,” Patrick said in an emotional tribute to his brother at his memorial service last June. “Kazadi lives.”



The Kazadi family has a<a href="https://www.gofundme.com/f/in-memory-of-christian-kazadi" target="_blank" rel="noreferrer noopener"> GoFundMe page</a> to raise funds to pay for legal fees for investigating Christian&#8217;s death and to provide financial support for the family.



By Giacomo Tognini, Forbes Staff

Chris Kazadi

The Mysterious, Unsolved Murder Of Under 30 African Social Media Entrepreneur Christian Kazadi

Despite worries that the artificial intelligence program could make cheating easier, half of K-12 teachers report using it. Edtech companies are scrambling to release their own tools.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Diego Marin used to work late into the night at the end of each trimester submitting grades and comments for his 70 eighth grade math students at a Chicago public school. No more. Now he has a virtual assistant, ChatGPT, that cuts the time he spends on report card comments to an hour, by rapidly putting his individualized comments on each student into smooth, clean prose.



“As teachers, it feels like we’re short on time for everything,” Marin says. “I’ve had some nights where I’ve stayed up until midnight submitting comments.” He also uses the free artificial intelligence chatbot to help draft emails to parents, complete Individualized Education Programs for some students (such as those with learning disabilities) and even as a teaching tool.



Admittedly, Marin, 30, is into social media and the latest tech—he has 1.4 million followers on TikTok. But his embrace of AI isn’t unusual among teachers. Despite immediate fears after ChatGPT’s release to the public last November that the service would upend education by making cheating easier, more teachers seem to be using it to their advantage than worrying about that risk.



In a February survey of 1,000 kindergarten through 12th grade teachers nationwide, 51% said they had used ChatGPT, with 40% reporting they used it weekly and 10% using it daily. (ChatGPT is free, as long as users create an account with OpenAI. To access the latest version of the bot, built atop a more advanced version of AI—<a href="https://www.forbes.com/sites/cyrusfarivar/2023/03/14/gpt-4-can-ace-standardized-tests-do-your-taxes-and-more-says-openai/">GPT-4, instead of GPT-3.5</a>—users must pay $20 a month for a ChatGPT Plus subscription.)



About a third of teachers in the survey,&nbsp;<a href="https://www.waltonfamilyfoundation.org/learning/teachers-and-students-embrace-chatgpt-for-education" target="_blank" rel="noreferrer noopener">commissioned by the Walton Family Foundation</a>, said they use ChatGPT for lesson planning and coming up with creative ideas for classes.



Middle school and high school teachers were more likely than those teaching lower grades to say they use the AI. Twenty-two percent said they use it to communicate with parents, students and colleagues. It’s easy to see the appeal of the tool, particularly for out-of-classroom tasks: a&nbsp;<a href="https://www.edweek.org/teaching-learning/how-teachers-spend-their-time-a-breakdown/2022/04" target="_blank" rel="noreferrer noopener">2022 EdWeek survey</a>&nbsp;found the typical teacher works 54 hours per week, with five hours spent on planning and prep, three hours on administrative work and two hours communicating with parents.



Of those teachers who have used ChapGPT, 88% said it’s having a positive impact on education. Even teachers who haven’t tried it themselves are more likely to say it has had no impact than a negative one—44% to 10%, respectively. But just 9% of nonusers ascribed a positive impact to the tool.



Moreover, only one in ten teachers reported catching a student using the chatbot without their permission. It’s unclear whether that’s because cheating is fairly rare or because teachers are missing the signs of students inclined to cheat (or more charitably, cut corners) using ChatGPT. But overall, students have actually been slower than teachers to adopt the tool, according to a February survey of 1,000 students aged 12 to 17 also commissioned by the foundation, funded by members of the&nbsp;<a href="https://www.forbes.com/profile/walton-1/?sh=5fa2b45c6f3f">billionaire Walton family</a>. Only a third of surveyed students said they had tried ChatGPT at all, with younger students in the sample actually reporting more use than older ones.



Not all school systems have embraced the AI tool. In January, the New York City education department, which oversees the nation’s largest school district with more than 1 million students, blocked the use of ChatGPT by both students and teachers, citing concerns about safety, accuracy and negative impacts to student learning. The Los Angeles Unified School District, Seattle Public Schools, the Fairfax County Public Schools in Virginia, and Montgomery County schools in Alabama have also&nbsp;<a href="https://www.forbes.com/sites/ariannajohnson/2023/01/18/chatgpt-in-schools-heres-where-its-banned-and-how-it-could-potentially-help-students/?sh=3dffde086e2c">blocked access to the AI</a>.



In addition, another smaller survey shows more teacher skepticism—at least among those working at private schools. The National Association of Independent Schools (an association for private schools) recently surveyed about 200 teachers from its member schools and found 37% of them thought that AI in schools was a negative development, compared with only 33% who said it was positive. Another 30% of teachers said they thought it was neutral.



But some private school teachers, too, are in the vanguard of experimenting with the chatbot. Phillips Academy Andover in Massachusetts, one of the nation’s fanciest college-prep schools, does not have any blanket policies about using ChatGPT. “Andover is a really big private school, and we have plenty of faculty members that are excited by this, and there are many other people that are very nervous about it,” says Nick Zufelt, a computer science and math teacher.



Zufelt is in the excited category. He first introduced ChatGPT to his students as subject material. “I was having conversations with my students about what it was doing and why it’s doing what it’s doing,” Zufelt says.



Now he’s beginning to use it as a tool in a new computer science seminar he’s teaching, that includes both students who have never written a line of code before and some with several years of coding experience. Zufelt is allowing students to have ChatGPT write a first draft of the code they’re working on. “I’m more interested that students end up with an understanding of the code than an ability to write it from first principles,” he explains. “Learning to think like a programmer is a lot harder than learning to program.”



Patrick Powers, an English teacher at Navo Middle School in Denton, Texas, has also proactively introduced ChatGPT to students; he’s encouraged them to use it to practice for debate assignments, develop business proposal templates for a “Shark Tank”-like pitching simulation and gather information about historical figures. “[Students] appreciate it being an interactive tool instead of just using Google or instead of using the lesson plan,” Powers says. “They’re just more engaged with the lesson and content itself.” He also touts ChatGPT’s clean writing as a “strong work example” that his eighth graders can learn from.



Like Marin, Powers finds ChatGPT’s writing strong enough to use when reaching out to families and says it enables him to increase the frequency of those communications, even while saving hours of email writing time a week. “Instead of being reactive and saying, ‘Hey, Johnny had a bad day in class,’’’ Powers says, he now uses the chatbot to draft regular emails to parents about what’s going on in class and how students are succeeding.



Cheating on essays has been one of the biggest concerns for educators, but Powers isn’t too worried about it. “I had a good feel for the voice of my students, so I knew the type of work to expect from them,” Powers says. “And before I introduced it, I sent out a letter to parents letting them know about the expectations in the classroom and how this tool could help us learn greater content in an innovative way.” (For those wondering, he drafted the letter in his own voice, without ChatGPT.) That said, Powers does believe a program that detects AI-written work would be useful. (GPTZero is so far the most well-known service that can identify ChatGPT-generated text).



As teachers experiment on their own, edtech providers (like those in other industries) are racing to build services on top of GPT-4. Online learning nonprofit Khan Academy debuted a closed beta version of its new AI tutor, Khanmigo, earlier this month. While students can use the older version of ChatGPT to write essays or solve problems for them, Khanmigo will act only as a coach, says Sal Khan, founder and CEO of the operation that carries his name.



“If you could go to two different tutors, and one tutor says ‘Gimme your homework, I&#8217;ll just do it for you. Here—turn this in,’ and the other tutor says, ‘Okay, let’s think about this together. How would you approach that?’ The second tutor is going to be far better for the student,” Khan says. Notably, Khanmigo&nbsp;won’t&nbsp;just give students the answer, even if they ask.



Khanmigo is also better at math than the free version of ChatGPT. One of the well-known limitations of that free version built on GPT-3.5 is that it very often gives incorrect answers to basic math problems, even if it accurately explains the concepts behind the solution. Because Khanmigo is built using GPT-4, its math skills are much improved.



Marin has occasionally witnessed GPT-3.5’s math fails during class and now uses them as a learning opportunity. “When I introduced ChatGPT to my students … we had ChatGPT open on the projector and it was going through a sequence of how to solve a system and it actually came up with the wrong answer,” Marin says. “For a second I thought my kids were just pulling my leg to be honest—because that’s what they like to do—but they said ‘No, Mr. Marin, it’s telling us that this is the answer, but it’s not.’ So that’s where we went back and found a mistake.” Now, he routinely asks ChatGPT to solve problems incorrectly and asks students to point out where the bot went wrong and why.



Teachers interested in piloting Khanmigo can sign up for a waitlist, and once selected, are asked to donate $20 monthly to use the service. Running Khanmigo is expensive—it costs Khan Academy about $0.05 for every 600-700 words that Khanmigo generates, and Khan anticipates that the AI will cost about $10 to $15 per student per month to run. The nonprofit has spent millions to build Khanmigo and hopes to secure extra philanthropic support for the project.



“Right now, it’s not cheap to be running this stuff,” Khan says. “The reason why we’re moving so aggressively on this, but in a safe way, is we think those costs are going to come down dramatically. And so we’re going to make it a lot more accessible in the coming months.”



Journalists, bloggers and other users have revealed how easy it can be to get around GPT’s guardrails. A&nbsp;NewYork Times&nbsp;tech columnist&nbsp;<a href="https://www.nytimes.com/2023/02/16/technology/bing-chatbot-microsoft-chatgpt.html" target="_blank" rel="noreferrer noopener">published a disturbing conversation</a>&nbsp;with Microsoft’s Bing chatbot—also built using GPT-4—that showed the AI, which called itself Sydney, fantasizing about hacking computers, spreading misinformation, and harming humans, despite guardrails that are supposed to prevent Bing from talking about such topics. (Additional guardrails&nbsp;<a href="https://www.forbes.com/sites/mattnovak/2023/02/18/microsoft-puts-new-limits-on-bings-ai-chatbot-after-it-expressed-desire-to-steal-nuclear-secrets/?sh=3bf6fc90685c">have since been added</a>.)



Khan is well aware of this, and has built additional safety measures into Khanmigo to keep students from straying into questionable, non-educational conversations with the chatbot. All Khanmigo chats are logged, and if a student runs up against one of Khanmigo’s guardrails, teachers are notified.



ChatGPT also has a tendency to make things up—called hallucinations in AI-speak. Joe Welch, a history teacher at North Hills Middle School in Pittsburgh, saw this first hand, when he was seeking specific information on a niche topic.



A student working on a report shared that he had found conflicting information from different data sources about the extent of damage and casualties caused by a series of tornadoes that hit Western Pennsylvania in 1985. “I asked ChatGPT for a table of casualties, towns, time of the tornado, and monetary value of damage and the table came back with extremely inaccurate numbers,” says Welch. In other words, while a middle-schooler recognized the numbers he was finding were in conflict, the chatbot admitted to no such uncertainty, producing a definitive (but wrong) table.



Despite this, ChatGPT has saved Welch tons of time. He uses the chatbot, among other things, to create tables for student study guides, which would have previously used up at least an hour of prep time.



“It’s just cleaning up a lot of tasks that would’ve been arduous for me to complete,” he says.



<a href="https://www.forbes.com/sites/emmawhitford/"></a>By Emma Whitford, Forbes Staff

Microsoft Built GPT-4 Into Office

How ChatGPT Is Fast Becoming The Teacher’s Pet

With star backers like Leonardo DiCaprio and a planet-friendly mission, neobank Aspiration reached a valuation of $2.3 billion in 2021. Then growth stalled and its SPAC deal was delayed. Now it&#8217;s hawking its services in the dubious carbon credits business.



Ona Thursday in mid-October 2022, employees at Marina Del Rey, California-based <a href="https://www.forbes.com/companies/aspiration/">Aspiration</a> gathered virtually for a company-wide meeting. The nine-year-old business, which offered everything from a debit card for consumers to environmental sustainability services, had an important announcement to make. Of the 400 employees summoned, there was one glaring absence from the invitation list: its chief executive and cofounder, Andrei Cherny.



Cherny’s cofounder, Joe Sanberg, took the virtual floor, declaring that the startup’s chief sustainability officer, Olivia Albrecht, was now its chief executive officer. Sanberg, an unfamiliar face to many employees, failed to make any mention of Cherny, who had led the startup since its inception and had been well-liked. Not only wasn’t Cherny invited to the meeting, but his email and&nbsp;<a href="https://www.forbes.com/companies/slack-technologies">Slack</a>&nbsp;access had been terminated. Many raised their hands to ask the obvious questions, yet the leadership team ended the call without taking a single inquiry.



“Everyone was shocked,” says a former Aspiration employee. “People are still uncertain and concerned about what their future looks like.” In successive meetings over the next few months, the startup, whose website states it’s “committed to transparency,” never addressed Cherny’s abrupt departure.



“Aspiration remains grateful for the achievements of our founding leadership team,” an Aspiration spokesperson said in a statement. “They built a leading climate action platform that uses the tools of finance to tackle our planet’s biggest problems.”



Based on conversations with nearly a dozen former Aspiration employees,&nbsp;Forbes&nbsp;learned that a rift developed between CEO Cherny, 47, who owns 10% of the startup, and cofounder Sanberg, 43, who owns roughly 35%. By October, the market for tech stocks had already collapsed, and Cherny had failed in his efforts to take the once-promising fintech public. Although Cherny had been discussing his resignation with Sanberg and the rest of the board for months, the board decided to exclude him from the announcement. They promoted Albrecht, who previously led ESG (Environmental, Societal and Governance) strategy at asset manager PIMCO, and embarked on a restructuring, deemphasizing its consumer-banking focus and shifting toward a company selling carbon credits to corporations.



Aspiration’s upheaval is a stark departure from the situation just ten months prior, when Cherny and the company were riding the euphoria that helped fintech rake in a record $140 billion in investments in 2021, according to&nbsp;<a href="https://www.cbinsights.com/research/report/fintech-trends-2022/" target="_blank" rel="noreferrer noopener">CB Insights</a>. Aspiration had raised nearly $600 million from a dazzling list of investors that included Leonardo DiCaprio, Drake, Cindy Crawford,&nbsp;Iron&nbsp;Man&nbsp;Robert Downey Jr. and billionaire&nbsp;<a href="https://www.forbes.com/profile/steve-ballmer">Steve Ballmer</a>. After all, fintech was red-hot, and the unicorn’s tree-hugging mission promised to plant a tree with Aspiration debit card purchases.



In mid-2021, Cherny had struck a deal to go public via a special purpose acquisition company (SPAC) that would bring in more than $400 million in fresh capital and&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/1839610/000121390021043564/ea146087ex99-1_interprivate3.htm" target="_blank" rel="noreferrer noopener">value Aspiration at $2.3 billion</a>, creating a tidy gain for its backers.



But as the stock market tanked in 2022, SPACs fell swiftly out of favor. Eventually 180 of them were canceled, says Julian Klymochko, who runs asset management firm Accelerate, which invests in SPACs. Meanwhile, growth at Aspiration’s digital bank stalled. Monthly downloads of its app shrunk from 300,000 in August 2021 to 30,000 a year later, according to mobile analytics firm Apptopia&nbsp;(see chart, below).



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<h2 class="wp-block-heading" id="h-decimated-downloads">DECIMATED DOWNLOADS</h2>



<h4 class="wp-block-heading" id="h-aspiration-s-app-downloads-plummeted-as-the-fintech-market-cratered-and-the-company-shifted-focus-from-consumer-banking-to-selling-carbon-credits-to-businesses">Aspiration’s app downloads plummeted as the fintech market cratered and the company shifted focus from consumer banking to selling carbon credits to businesses.</h4>



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Under Cherny’s leadership, Aspiration had begun to shift its business model toward a niche of the environmental sustainability industry called carbon credits, or carbon offsets. The basic idea: Any company can mitigate the damage its business does to the environment by funding initiatives that will remove carbon from the atmosphere, such as planting trees. Since early 2020, one of the trademark features of Aspiration’s digital bank has been that you can round up purchases to the nearest dollar and donate to tree-planting organizations. Aspiration apparently decided that planting trees could be the basis for its new business model of selling carbon credits to large companies.



“We are very much focused on delivering profitable, scalable businesses to our shareholders,” says CEO Albrecht, 40. “As we&#8217;ve looked at our ability to have an impact and create value for shareholders, the carbon business and carbon assets are very attractive for us.”&nbsp;<a href="https://www.aspiration.com/" target="_blank" rel="noreferrer noopener">Aspiration’s website</a>&nbsp;has been revamped—it now leads with “Empowering business to change climate change” and advertises a mission to plant one billion trees by 2030.



In 2021, Aspiration’s carbon credits sales brought in&nbsp;<a href="https://assets.ctfassets.net/ejg6grzpbbxj/6CPjR0sfLq8XVq02eo0JUK/cd95b54cf9196c8c4cd6280e4d752718/Aspiration_4Q21_Earnings_Release__02-17-22_.pdf" target="_blank" rel="noreferrer noopener">$56 million</a>&nbsp;in revenue compared with $29 million from digital banking (another $14 million came from “consumer sustainability services” like the roundup feature for planting trees). But just as the California fintech is doubling down on this new mission, the future of carbon credits is in question, with experts saying carbon credits’ environmental impact has been grossly overestimated. There’s a “crisis in quality” in carbon offsets, says Barbara Haya, director of the Berkeley Carbon Trading Project, who has been studying offsets for over two decades. “The market is in a huge amount of flux, and anyone who enters has to weather this sense that we don’t know what direction things are going.”



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Andrei Cherny’s path&nbsp;to becoming a tech entrepreneur defies convention. He majored in government at Harvard and got a law degree from the University of California at Berkeley in 2003. He then served as White House aide to President Bill Clinton and wrote speeches for Al Gore and John Kerry. Cherny’s next stop was the U.S. Navy as a reserve intelligence officer for eight years until 2011. He also was part of the team that helped Elizabeth Warren launch the Consumer Financial Protection Bureau (CFPB) in 2010.



In 2013, he cofounded Aspiration with Joe Sanberg, who has said he&nbsp;<a href="https://jewishjournal.com/cover_story/182589/" target="_blank" rel="noreferrer noopener">worked on Wall Street</a>&nbsp;for seven years at Tiger Global and Blackstone but who&nbsp;<a href="https://www.linkedin.com/pulse/fireside-chat-aspiration-co-founder-chair-board-joseph-lustrino/" target="_blank" rel="noreferrer noopener">left finance</a>&nbsp;“to pursue what really speaks to my heart, which is to change the world.”



Aspiration took a novel approach to creating a digital-first, branchless bank by appealing to environmentally conscious consumers. It offered features like a “sustainability score” that shows customers how climate-friendly their purchases are. With help from subadvisor UBS, it created its own mutual fund for climate-conscious consumers called Aspiration Redwood, though the fund, which has accumulated only $132 million in assets, has high fees and lackluster performance, according to&nbsp;<a href="https://www.morningstar.com/funds/xnas/redwx/performance" target="_blank" rel="noreferrer noopener">Morningstar</a>. Like other neobanks, Aspiration is not a licensed bank. But it registered as a broker-dealer so it could earn interest income on customers’ deposits, as opposed to relying only on interchange, the fees merchants pay when consumers swipe their debit and credit cards. Many neobanks have found they&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2023/02/08/merger-or-perish-25-struggling-fintech-startups">can’t survive on interchange</a>&nbsp;alone.



After the pandemic hit and fintech startups saw a surge in adoption from Americans stuck at home, Aspiration grew from roughly 1.5 million customers in early 2020 to five million “purpose-driven members” in the summer of 2021. But those user numbers weren’t quite what they appeared to be. Like other tech startups eager to tout growth above all, Aspiration was referring to the total number of registered emails it had, regardless of whether the customers ever used the product. As of June 2021, it had just 592,148 funded accounts.



Meanwhile, the startup spent extravagantly on marketing to hit aggressive growth targets. In its&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/1839610/000121390021043566/ea146087ex99-2_interprivate3.htm" target="_blank" rel="noreferrer noopener">pitch to go public</a>, Aspiration planned to spend $149 million on marketing in 2021, even though it expected to take in just $98 million in revenue.



Questions arose around its environmental impact claims. Though Cherny had said Aspiration’s partners had planted over 35 million trees, a&nbsp;<a href="https://www.propublica.org/article/the-celebrity-backed-green-fintech-company-that-isnt-as-green-as-it-seems" target="_blank" rel="noreferrer noopener">Pro-Publica article</a>&nbsp;revealed that only about 16 million had been put in the ground. The other 19 million had been funded but not yet planted. “The Aspiration community has supported the planting of more than 35 million trees, an amazing accomplishment we’re really proud of,” Cherny said in response to the criticism. (Today, Aspiration&nbsp;<a href="https://www.prnewswire.com/news-releases/aspiration-plants-101-million-trees-with-eden-reforestation-projects-301735489.html" target="_blank" rel="noreferrer noopener">says</a>&nbsp;it has planted more than 100 million trees.)



In October 2021, just as fintech stock valuations were peaking, the company launched Aspiration Zero, a credit card&nbsp;<a href="https://www.businesswire.com/news/home/20211014005303/en/Groundbreaking-Aspiration-Zero-Launches-Today-First-of-its-Kind-Credit-Card-Built-to-Fight-the-Climate-Crisis" target="_blank" rel="noreferrer noopener">claiming</a>&nbsp;it could “offset the average person’s entire carbon footprint just by using it once a day.” Two months later, it&nbsp;<a href="https://investors.blueapron.com/press-releases/2021/12-15-2021-220513199" target="_blank" rel="noreferrer noopener">announced</a>&nbsp;that meal delivery service Blue Apron would launch a Blue Apron Aspiration Zero card.



In early 2022, Aspiration started seeing declines in the number of transactions customers were making and the amount of money they were keeping in their accounts, says a former employee. New-user growth slowed dramatically as interest rates rose and the company pulled back on marketing. To make matters worse, the Aspiration Zero card was plagued by technical issues and problems with its partner bank. By December 2022, the card had fewer than 10,000 users, says a former employee. The deal with Blue Apron was called off completely, and today Aspiration Zero is no longer accepting new applications. Asked whether it will come back online, Albrecht says, “We are taking a deep dive and taking a look at the underlying profitability and the underlying quality of all products.”



In December 2022, Aspiration laid off roughly 100 employees, and shortly afterward, Albrecht announced that the company would be focusing on selling carbon credits to corporations. All consumer marketing would be paused, and new features that had been planned for Aspiration’s digital banking business were put on hold, according to a former employee.



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Given the intense competition&nbsp;and rising costs that digital bank startups face–plus the dormant market for funding these ventures–it’s no wonder Aspiration has chosen carbon credits as its new raison d&#8217;être. According to McKinsey and environmental research organization Ecosystem Marketplace, the voluntary carbon credits market could grow to&nbsp;<a href="https://www.mckinsey.com/~/media/mckinsey/business%20functions/sustainability/our%20insights/a%20blueprint%20for%20scaling%20voluntary%20carbon%20markets%20to%20meet%20the%20climate%20challenge/a-blueprint-for-scaling-voluntary-carbon-markets-to-meet-the-climate-challenge.pdf" target="_blank" rel="noreferrer noopener">$50 billion in 2030</a>, up from nearly&nbsp;<a href="https://www.ecosystemmarketplace.com/articles/the-art-of-integrity-state-of-the-voluntary-carbon-markets-q3-2022/" target="_blank" rel="noreferrer noopener">$2 billion in 2021</a>. Over 30% of the world’s largest publicly traded companies&nbsp;<a href="https://ca1-nzt.edcdn.com/Net-Zero-Tracker/Net-Zero-Stocktake-Report-2022.pdf?v=1655074300" target="_blank" rel="noreferrer noopener">have net zero targets</a>–goals to balance their emissions with an equal set of carbon-absorbing initiatives–up from only 20% in 2020.



Most of Aspiration’s credits come from tree-planting reforestation projects. It has contracted with nonprofit partners like Eden Reforestation to plant trees in countries like Kenya, Madagascar, Mozambique and Indonesia. New trees can take from five to seven years to grow and start absorbing carbon, and they can’t be sold as credits until then. To bridge that gap, Aspiration also buys and sells access to mature projects that are already sucking up greenhouse gasses, including reforestation offsets, ocean-kelp offsets and soil-transformation offsets. In terms of competitive moats around Aspiration’s tree-planting business model, it&#8217;s difficult to determine if one exists.



Albrecht says that Aspiration only deals in “high-quality, high-impact carbon credits,” though their quality is hard to assess, given limited transparency into their projects. She also says Aspiration transacts only in credits that are registered under one of the major independent carbon standards agencies, such as Verra and Gold Standard. Aspiration also created its own “Aspiration Standard” that involves independent reviews, and it says only 20% of registry-issued credits meet that hurdle.



Despite rosy long-term forecasts, success in the carbon credits business will be challenging for Aspiration. Carbon offsets are a nascent market—it’s a Wild West with many projects of dubious legitimacy.



Some credits, for example, are based on “avoidance,” where someone pays a government or landowner to promise not to cut a forest down. New Hampshire-based Lyme Timber once sold carbon credits from land that was already protected by the state of Tennessee,&nbsp;<a href="https://www.bloomberg.com/news/articles/2022-03-17/timber-ceo-wants-to-reform-flawed-carbon-offset-market?sref=BQ0oui0v" target="_blank" rel="noreferrer noopener">Bloomberg reported</a>&nbsp;last year. Some of these credits were then purchased by Chevron, letting the oil giant write off emissions based on trees that would have never been cut down in the first place. (<a href="https://www.lymetimber.com/bloomberg-article-on-lyme/" target="_blank" rel="noreferrer noopener">Lyme Timber later wrote</a>&nbsp;that the rules for carbon credits have changed such that this would no longer be possible.)



“We’re all coming to the same conclusion that the majority of offsets on the market are not genuine,” says Elias Ayrey, head scientist at carbon-credit ratings agency Renoster. Amy Francetic, cofounder of climate solutions investment firm Buoyant Ventures, won’t invest in carbon-credit startups until there’s more certainty in the market. “The rush of capital–especially from big polluters–into the space as a means of satisfying shareholder, customer and employee concerns about their emissions and polluting activities, and looking at that as kind of a Band-Aid on their situation is really troubling,” she says.



According to Quantum Commodity Intelligence, the uncertainty surrounding the quality of offsets and negative media attention have recently caused monthly trading volume for voluntary carbon credits to plummet, down 78% in the last two months on CBL Markets, a global trading platform for environmental commodities.



While Aspiration’s enterprise carbon-offsets business doesn’t involve secondary market trading, it’s unclear if its business has been affected by the recent downturn. According to its most recent financial disclosures, Aspiration had accumulated more than $300 million in&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/1839610/000119312522042546/d204847ds4.htm" target="_blank" rel="noreferrer noopener">net losses</a>&nbsp;for 2019, 2020 and the nine months ending September 30, 2021. A former employee says Aspiration had more than $200 million in revenues in 2022, with 75% or more coming from its sustainability business, though it remains unprofitable.



It’s difficult to assess the staying power and profitability of Aspiration’s carbon-credits revenue. In the fall of 2021, for example, Aspiration landed a multiyear deal with the L.A. Clippers for them to buy carbon credits from the startup. There were major strings attached: Aspiration simultaneously agreed to buy a big sponsorship from the Clippers to display its brand in the arena. People familiar with the deal say Aspiration either broke even or lost money on it.



Among startups, perhaps especially those in which planting trees is a core competency, hope springs eternal. Aspiration has not yet given up on the SPAC merger it first promised investors in August 2021. The IPO deal deadline has been delayed twice, first to December 31, 2022, and more recently to March 31, 2023. Stay tuned.



 By Jeff Kauflin and Emily Mason, Forbes Staff<a href="https://www.forbes.com/sites/jeffkauflin/"></a>

A smartphone displays the S&P 500 market value on the stock

A Floundering Fintech’s Risky Reboot

The aircraft are already here. Pilot unions are preparing for battle. And the FAA is playing it cool. Autonomous flight is coming to civil aviation sooner than anyone thinks, and it may prove to be a surprising boon for flyover country.



InJanuary, Boeing CEO Dave Calhoun revealed an open secret in the world of aviation. “I think the future of autonomy is real for civil,” he told&nbsp;<a href="https://www.bloomberg.com/news/videos/2023-01-31/boeing-ceo-on-747-end-china-orders-and-autonomous-jets" target="_blank" rel="noreferrer noopener">Bloomberg TV</a>, before quickly offering some qualifiers. “It’s going to take time. Everyone’s got to build confidence. We need a certification process that we all have faith and believe in.”



The U.S. military has been flying autonomous planes for decades, of course, but always in a segregated airspace. Now it’s becoming increasingly clear that self-flying planes are coming to commercial aviation, and not in some distant&nbsp;Jetsons&nbsp;future world. Aircraft manufacturers are working toward it. Airlines are eager for it. The Federal Aviation Administration (FAA) is preparing for it. And pilot unions acknowledge the threat is looming on the horizon.



A decade ago, the conversation was largely speculative. But today, many in the aviation industry believe that small, self-flying planes could be carrying passengers by the end of this decade. Then, barring no major safety incidents, it could take as little as another decade before larger passenger jets operate without a pilot on the flight deck.



“It’s all about money,” says Dennis Tajer, a pilot for 35 years and the spokesman for Allied Pilots Association, which represents 15,000 American Airlines pilots. “Manufacturers are looking for the next innovative technology to deploy so that they can sell it and make money, and airlines are looking at how they can do this more cheaply.”



It’s a charge that’s difficult to rebut. Six years ago, a report from the Swiss bank UBS estimated that autonomous planes could save the air transportation industry more than $35 billion per year. Still, the same report flagged a bright red public perception problem. A 2017 global survey found that a majority of people would be unwilling to fly in a plane without a pilot, even if the airfare were cheaper. The next year, a&nbsp;<a href="https://www.ipsos.com/en-us/news-polls/Few-Would-be-Comfortable-with-Flying-on-Pilotless-Airliners" target="_blank" rel="noreferrer noopener">public survey from Ipsos</a>&nbsp;found that 81% of Americans would not be comfortable traveling on a self-flying plane. Notably, that survey was sponsored by the Air Lines Pilots Association (ALPA), whose 65,000 members make up the largest pilot union in the country.



The introduction of autonomous aircraft into the civil aviation mix will begin with small cargo planes, led by companies like&nbsp;<a href="https://xwing.com/" target="_blank" rel="noreferrer noopener">Xwing</a>, a Northern California-based startup. “We took an existing Cessna airframe,” says Xwing CEO Marc Piette, “which is the most widely used express cargo airframe, and we’ve been modifying that vehicle to convert it to a remotely-supervised vehicle. We think the cargo market is the best first place to deploy this. And we’ve been very deliberate.”



For the past few years, Xwing has been running automated test missions, mainly in California. A flight plan is submitted, just as if there were a human pilot, and the flight’s parameters are pre-programmed before takeoff. “It’s really a one-click thing,” Piette says. “You engage the system and it runs its mission.”



Until the technology is certified by the FAA, however, there will need to be a safety pilot on board. This allows Xwing to fly without jumping through regulatory hoops. “The safety pilot can disconnect a system and revert the aircraft to manual flying, but otherwise doesn’t do anything but monitor the system. It’s a very boring job,” Piette explains. Meanwhile, the Cessna is operated from the ground, with two human controllers watching a moving map on screens and interfacing with air traffic control.



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<blockquote class="wp-block-quote">
“All of these companies are really looking forward to the day where there will not be a pilot on board.”
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Once the technology is certified, Xwing plans to introduce and operate these vehicles by late 2025 and then make it available to other operators. “To give you an example, FedEx has about 240 Cessna 208s for its U.S. network,” Piette says, alluding to the scalability of the venture. He expects his autonomous aircraft to be transporting human passengers by the end of this decade.



Xwing is certainly&nbsp;<a href="https://www.forbes.com/sites/jeremybogaisky/2023/01/30/this-robot-electric-cargo-plane-could-be-the-start-of-a-wave-that-transforms-shipping">not the only manufacturer</a>&nbsp;working on autonomous cargo aircraft, but it has a secret weapon in its chief compliance and quality officer. Earl Lawrence knows a thing or two about FAA regulations, having recently left the agency, where he was the head of aircraft certification. Prior to that, Lawrence had started the FAA’s unmanned office. “One of the key things of bringing this category of aircraft to the cargo market is that we are not changing the rules. We are following the regulations,” he says, noting that some companies in the space have made proposals that do not comply with FAA regulations. “That’s what significantly slows things down.”



Few people know more about autonomous aircraft than Stephane Fymat, who heads up Urban Air Mobility (UAM) and Unmanned Aerial Systems (UAS) at&nbsp;<a href="https://aerospace.honeywell.com/us/en/about-us/blogs/aviations-future-is-safer-more-efficient-and-more-autonomous" target="_blank" rel="noreferrer noopener">Honeywell</a>, which has a long history producing autopilot systems for Boeing Dreamliners, Gulfstream and Embraer jets as well as other aircraft.



<figure class="wp-block-image"><img decoding="async" src="https://imageio.forbes.com/specials-images/imageserve/63f7cb3a3307e5f9d18ba85a/autonomous-plane-Pipistrel-and-Textron/0x0.jpg?format=jpg&amp;width=960" alt="autonomous plane Pipistrel and Textron"/><figcaption class="wp-element-caption">No Flying Zone: Pipistrel&#8217;s autonomous plane has plenty of room for cargo, but no cockpit for a pilot.COURTESY OF PIPISTREL AND TEXTRON</figcaption></figure>



Fymat shared with&nbsp;Forbes&nbsp;a PowerPoint deck for a speech he has given at invitation-only industry conferences. After a brief introduction, a slide appears with six images laid out in a grid. Each shows an aircraft produced by one of Honeywell’s clients. Some are designed for cargo and others for passengers. In one photo, men are loading boxes into a cargo plane made by Slovenian light aircraft manufacturer Pipistrel, which Rhode Island-based Textron acquired last year. The plane does not even have a cockpit.



“Basically, most of them will start with a pilot now and move to having no pilot on board,” Fymat says of Honeywell’s partners. “A few of them want to do it within four or five years and some think it’s more like a 10-year range.”



One immediate advantage of pilot-free small planes is the increased capacity. Autonomy can immediately turn a six-passenger plane into seven-seater. “All of these companies are really looking forward to the day where there will not be a pilot on board,” Fymat says. “They’re all planning for it, in fact, and we’re helping them get there.”



“Cargo is an entryway drug for them,” Tajer says. “The script is to start with something that doesn’t sound like it’s going to hurt people. But the reality is that it’s still the same sky, and it’s still a metal tube in the air and passenger jets will be sharing the sky with them.”



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<h3 class="wp-block-heading" id="h-readying-for-take-off">Readying for Take Off</h3>



<h3 class="wp-block-heading" id="h-how-self-flying-passenger-jets-will-be-airborne-by-the-2040s">How self-flying passenger jets will be airborne by the 2040s.</h3>



<blockquote class="wp-block-quote">
2023
<cite>Various aircraft manufacturers are working with the FAA on certifying autonomous aircraft.</cite></blockquote>



<blockquote class="wp-block-quote">
2025-2026
<cite>The first self-flying cargo planes will enter civil aviation, sharing the skies with piloted airplanes.</cite></blockquote>



<blockquote class="wp-block-quote">
2030-2035
<cite>Small, self-flying planes will begin carrying passengers on short, regional flights.</cite></blockquote>



<blockquote class="wp-block-quote">
2040-2050
<cite>Larger passenger jets will begin operating without a pilot on the flight.</cite></blockquote>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



For manufacturers, bringing new aircraft into the mix requires navigating the regulations of the FAA and the world’s other aviation authorities. “We have an application on an all-electric autonomous airplane that we refer to as Wisk,” Boeing’s Calhoun told Bloomberg. “That application is in and the FAA will begin working with us today on building out a certification program for autonomy and for Wisk. There’s so much to learn, so much to do, but it is being done.”



Some worry that the FAA may be too accommodating. “The FAA ebbs and flows between being a monolithic oversight authority to slowly, over time, becoming too cozy with the manufacturers and the airlines,” Tajer notes. “That’s a funding issue, it’s experience, and then it also can become a culture issue, which you don’t have to look too far back [<a href="https://www.forbes.com/sites/brianbushard/2023/01/26/boeing-arraigned-in-court-over-737-max-crashes-two-years-after-25-billion-settlement/">to the 737 Max crashes</a>], to see what happens when there’s too cozy a relationship. The FAA just needs to stand firm on delivering the safest possible system out there.”



During the pandemic, some airlines quietly lobbied the agency to amend what’s known as Part 121 of the Federal Aviation Regulations, which requires scheduled carriers to have at least two qualified pilots on the flight deck, arguing that a single-pilot approach would help alleviate the pilot shortage. The FAA’s European counterpart&nbsp;<a href="https://www.forbes.com/sites/suzannerowankelleher/2023/02/07/europe-aviation-2-pilots-in-cockpit/?sh=55960bde1e4c">recently ruled against</a>&nbsp;making such a change until 2030 at the earliest.



It’s a rationale echoed by manufacturers. “Look at the airliners that we fly in every day,” Fymat says. “They don’t yet take off by themselves. They don’t taxi by themselves. But once they’ve taken off, they’ll do the entire flight by themselves, and they will land by themselves if you wanted them to. Airplanes have been doing this for years.” He adds that it’s just a matter of time before jets can do it all. “Adding in the ability to divert and redo a flight plan because of an emergency or whatever, communicating with air traffic control, those are the next pieces. But the basics already there.”



Naturally, the idea of&nbsp;<a href="https://www.forbes.com/sites/alexledsom/2022/11/21/airlines-move-to-have-one-pilot-not-two-in-cost-cutting-solution/?sh=6e68e5374bc4">single-pilot flight decks</a>&nbsp;doesn’t sit well with pilots. “They’re talking about taking out that backup human system,” Tajer says. “Having that second pilot can be the difference between people getting hurt or them getting through an incident safely. And that’s because no matter how much technology you have, the importance of having another human being who has as much at risk and is committed to protecting those passengers in the back is what makes our safety system so successful here in the U.S.”



Meanwhile, automation is advancing. “AI technology is a big opportunity to establish the next generation of products in the industry, the epicenter of really, really powerful core technologies,” says Arne Stoschek, the head of machine learning and autonomy at Acubed, an Airbus innovation center. At Toulouse Airport, near Airbus headquarters in southwestern France, the manufacturer is testing a suite of pilot-assistance technologies in a demonstrator it calls&nbsp;<a href="https://www.airbus.com/en/newsroom/stories/2023-01-could-the-humble-dragonfly-help-pilots-during-flight" target="_blank" rel="noreferrer noopener">DragonFly</a>. Much like how actual dragonflies can recognize landmarks while in flight, the aircraft’s systems use artificial intelligence and sensors on the outside of the plane to “see” features in the landscape and safely maneuver autonomously within its surroundings. To date, the capabilities include automated emergency diversion in cruise, automatic landing and taxi assistance.



In the near term, the greatest challenge for self-flying planes may be getting the public to accept them. Xwing’s Lawrence expects public perceptions to evolve with time. “As the technology gets rolled out, people will understand it better and trust it more,” he says.



Advocates point out that among the first beneficiaries will be people who live in rural locales far from major airports. “This isn’t just about getting somebody from downtown Wall Street to JFK in eight minutes flat, which is very valuable by the way,” Honeywell’s Fymat says. “It’s also about the rural community, who right now has no air service. Or the essential air service that they have is, like, once a week.”



Xwing’s Piette agrees. “The impact is going to be dramatic,” he says. “Among the reasons [regional airports] are losing commercial traffic today is that there’s a significant pilot shortage, which makes it very challenging to staff some of these routes. If you’re in places like Wichita or Louisville, good luck trying to find direct routes to wherever you want to go.” With a large volume of smaller aircraft, there can be a higher frequency of flights between any small-city destination pair, according to Piette. “And we can reinstate access to flights to small localities.”



Ultimately, Tajer argues, “it’s going to come down to whether people eventually get used to the idea. And I don’t know, but when you’re in the sky, and it’s noisy, and the aircraft is doing things you’ve never felt before, and nobody’s in the cockpit, you might be thinking, ‘I sure hope that kid down on the ground at the computer has got this stuff figured out, because my family’s lives depend on it.’ That’s a big hump to get over.”



By Suzanne Rowan Kelleher, Forbes Staff

US-AIRPLANE-TRAVEL-TRANSPORT

No Pilot, No Problem? Here’s How Soon Self-Flying Planes Will Take Off

One of the hottest trends in finance is prepaid muni bonds structured to help local utilities buy decades worth of renewable electricity. They’re good for the environment, but even better for the banks that will profit from cheap financing, trading profits and federal tax breaks.



<abbr>S</abbr>ocially responsible investing,&nbsp;marketed under the moniker “ESG” (short for environmental, social and governance), is a huge and growing business. In 2015 global ESG-related assets were $2.2 trillion, according to PwC, growing to $9.4 trillion in 2020 and nearly doubling in 2021 to $18.4 trillion. Sustainable bonds are a big slice of this pie. Globally, over the last two years, an average of more than 400 bonds have been issued per quarter, totaling over $1.7 trillion, according to the London Stock Exchange’s Refinitiv group. European issuance is more than double that of the U.S., but a wave of new green bonds is coming here.



One particularly vibrant corner of this market: ESG-certified municipal bonds, such as those designed to help local communities prepay for decades’ worth of green electricity. According to Monica Reid, the founder of Kestrel, which charges “a fraction of a basis point” of a new bond deal’s face value to verify new issues as “social,” “green” or “sustainable,” there have been $85 billion worth of these municipal bonds issued in the U.S. in the last two years. Reid’s Hood River, Oregon–based team of 27 analysts and engineers certified nearly a third of them.



“Not everything is green or sustainable or socially beneficial because it’s financed with municipal bonds,” Reid says. “The muni market is also where coal ash dumps are financed, ports and airports. It’s where turnpikes and toll roads are financed. We are very discerning. Internally we have a do-no-harm criteria. If repayment is from oil royalties or gambling revenues, that’s a problem.”



Like so many environmental trends, this one started in California. Over the past 14 months enormous Wall Street banks such as Goldman Sachs and Morgan Stanley have persuaded ultra-green electric power agencies in Northern California to hand them roughly $2.7 billion, with $2 billion more in the works. The power agencies raise that upfront cash by selling tax-free municipal bonds of the type Kestrel certifies. In return, the banks so far have promised to deliver into the California power grid 2.2 million megawatt hours per year of “green” electricity, sourced from solar, wind and hydropower.



There are many winners. The banks get cheap loans to spend on whatever they want. Californians, like the residents of 15 other states and the District of Columbia, get to pick their provider and can choose to put their money toward greener power. And investors can hold the bonds comforted by the knowledge that they have invested in something not only green but backed by a big bank’s guarantee.



The loser? Uncle Sam. If Morgan Stanley issued its own similarly structured corporate debt to raise funds, it would likely pay 6% or so interest, subject to federal tax. But when Morgan raises cash via a municipal prepaid green electricity deal at a 4% interest rate, it incurs no federal tax. On $3 billion in green power munis so far, that would equate to some $50 million a year in forgone tax revenue. Maybe it’s worth it. After all, it’s a model that could quickly spread across the nation and help underwrite the development of enormous amounts of greener energy. But it also could add up to billions of dollars in hidden annual subsidies to rich Wall Street banks. That might not play well in Peoria.



California is one of 10 states that have enabled the creation of local electricity-purchasing cooperatives called Community Choice Aggregators. They have names like Marin Clean Energy and Silicon Valley Clean Energy, and were formed to enable Californians to buy power marketed as 100% “green.” In recent years these co-ops have entered multidecade contracts directly with the owners of solar fields and wind farms to buy their electricity output.



But these electric co-ops are utterly unequipped to manage a host of complex contracts with financial counterparties. So last year the Marin co-op joined with sister entities in places like Silicon Valley, Berkeley and Carmel to set up what’s known as a conduit issuer, the California Community Choice Financing Authority (CCCFA), essentially a shell agency with the power to issue tax-free municipal bonds.



<h4 class="wp-block-heading" id="h-cover-your-assets">COVER YOUR ASSETS</h4>



<h4 class="wp-block-heading" id="h-worldwide-bond-buyers-snapped-up-481-billion-in-green-bonds-last-year-but-buyer-beware-just-because-it-s-green-it-s-not-inherently-a-better-investment-warns-eve-lando-who-manages-billions-of-munis-at-santa-fe-new-mexico-based-thornburg">Worldwide, bond buyers snapped up $481 billion in green bonds last year. But buyer beware: “Just because it’s green it’s not inherently a better investment,” warns Eve Lando, who manages billions of munis at Santa Fe, New Mexico–based Thornburg.</h4>



In the last 14 months, CCCFA has issued $2.7 billion in three different Clean Energy Project Revenue Bond deals, with tax-exempt coupon rates of 4%, courtesy of Morgan Stanley and Goldman Sachs. The money goes toward prepaying for 30 years of renewable electricity. Prepaying comes with a discount. CCCFA members, for example, expect to save $7 million per year on their electricity purchases.



Of course, large prepayment for future commodity purchases is a Wall Street banker’s dream. A close look at the California bond documents reveals an impressive feat of financial engineering involving a maze of entities, commodity swaps and derivatives that effectively transform billions of green bond proceeds into a tax-exempt source of funding and trading profits for Morgan Stanley and Goldman Sachs.



Says Joann Hempel, a vice president and senior credit officer at Moodys, “The banks can use the funds for whatever they want.”



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On Wall Street, tax-free prepaid revenue bonds have long been associated with natural gas. In fact, nearly 95% percent of the estimated $60 billion that has been issued since the 1990s has been to purchase that fossil fuel. The idea was that small municipalities in places like rural Wilcox County, Alabama, or Omaha, Nebraska, would band together to sell tax-exempt bonds and use the proceeds to reserve a supply of natural gas at the same discounted prices that large city power systems paid.



In 1999, the IRS investigated the practice. The agency wanted to make sure traders weren’t using the bond deals to dodge taxes by using munis to acquire more gas than they needed, then selling the excess at a markup. In 2003, the IRS ruled that prepaid structures were kosher as long as 90% of the gas or electricity delivered went to the muni’s regular customers.



Enron’s bankruptcy in December 2001 was a setback for prepaid gas deals. The Houston energy firm had fraudulently boosted its cash flow by entering into numerous prepaid commodity swaps with banks like JP-Morgan and Citibank. In these circular deals, Enron would get billions in upfront payments from the banks in return for promising to repay the funds with gas deliveries. According to forensic investigators, Enron tended to repay these round-trip borrowings not with physical molecules of gas but with the proceeds of additional prepaid swaps, à la Charles Ponzi.



Although there were no municipal bonds involved, the Enron revelations chilled the market until the 2005 Energy Policy Act gave safe harbor for munis to get back into the prepaid business. “They got the IRS to sign off on a tax exemption. That’s when it exploded,” Hempel says.



Two of the biggest issuers of prepaid natural gas municipal bonds are Jackson, Alabama’s Black Belt Energy, a not-for-profit set up to purchase gas for residents of local cities and for companies operating in the area, including Boise Cascade, BASF, Louisiana Pacific and Main Street Natural Gas of Kennesaw, Georgia. According to&nbsp;The Bond Buyer,&nbsp;Black Belt, whose name derives from the dark, rich soil of this former cotton plantation region, was the third-largest issuer of municipal debt in the southeastern United States in the first half of 2022, raising $1.5 billion in prepaid natural gas bonds. That’s in addition to some $5 billion in gas-revenue bond deals it has floated since 2016.



Georgia’s Main Street Natural Gas issues gas bonds mostly on behalf of the Municipal Gas Authority of Georgia. It counts 79 cities and towns as its members. Since 2006, Main Street has issued no less than $10 billion in municipal prepaid gas bonds with a host of Wall Street partners including Merrill Lynch, JPMorgan, RBC and Citigroup.



Here’s how a recent Black Belt Energy bond deal worked. In October, Goldman Sachs and Stifel issued $383 million in 5.5% tax-exempt bonds, which were eagerly snapped up by fund managers including Vanguard, BlackRock and TIAA-CREF. After accounting for debt service reserve and other costs including 1% in issuance fees, some $377 million was handed over to a limited liability company called Aron Energy Prepay 13 LLC. That LLC was set up by Goldman Sachs’ commodity trading subsidiary, J. Aron, which has the ongoing responsibility of securing 30 years of physical gas deliveries as the project’s “gas supplier.”



Aron Energy Prepay 13 then delivers the money to Goldman Sachs, effectively as an unsecured loan, at lower tax-exempt rates. Then both sides hedge their exposures; because the revenue that Black Belt’s utility customers receive from selling gas is variable (based on the market price of gas) but the payments owed to bondholders are fixed, Black Belt and Goldman enter into commodity swaps contracts ensuring that no matter what happens with gas prices, those bonds will get paid.



The complex prepaid deals work out well for Black Belt’s gas customers, who lock in low prices, but they’re even better for Goldman Sachs, because the bank gains access to cheap funding. J. Aron is also a big winner, because it gets a long-term captive natural gas buyer for its commodity traders. In fact, J. Aron is one of the largest sellers of physical natural gas in North America. According to&nbsp;Natural Gas Intelligence,&nbsp;during the first six months of 2022, J. Aron delivered an average of 3.8 billion cubic feet of natural gas per day, roughly 3% of total consumption in the United States, to approximately 400 different municipal utilities.



Thanks in part to some $24 billion in prepaid muni bond gas deals over the last five years, and commodity markets roiled by the war in Ukraine, energy trading is booming on Wall Street. Goldman’s Global Markets division, powered by J. Aron’s traders, generated $22 billion in net revenue in 2021, its highest level in 12 years. Other firms active in prepaid bonds include RBC, Toronto Dominion, Morgan Stanley, Citigroup and JP-Morgan. Billionaire Ken Griffin’s flagship Wellington and Kensington hedge funds are the latest to jump on the prepaid muni bandwagon. In Janu-ary Griffin’s Citadel teamed up with JPMorgan to issue $626 million in tax-exempt bonds via Georgia non-profit Main Street Natural Gas.



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<abbr>F</abbr>or investors,&nbsp;prepaid energy bonds, renewable or fossil-fuel, are a no-brainer. Because the bonds are ultimately backstopped by the banks, investors get the rock-solid credits but with the higher yields typically associated with investing in the tax-exempt bonds of conduit issuers. And although these are 30-year bonds, they’re structured to allow issuers to call the bonds and reprice them within seven years, so they trade as if they have shorter duration—which is great when interest rates are rising.



“When you can buy a high-quality intermediate investment and pick up as much spread as you do in this sector, it’s a good place to be,” says one mutual fund manager.



And despite their small-town façade, issuers like Alabama’s Black Belt are operating far from their home markets, selling their cheap muni-financed gas as far away as Philadelphia, Arizona and L.A. There is nearly no risk in these deals, and what little there is rests squarely on the shoulders of their bank guarantors. Prepaid bonds have a stellar reputation. The only big bust was roughly $700 million in gas bonds issued by Main Street Natural Gas via Lehman Brothers. In 2008, when Lehman went belly-up, Main Street had to scramble to rearrange gas supplies, while bondholders ended up recovering only 80 cents on the dollar six years later.



It’s only natural that the banks and promoters see renewable energy as the next lucrative frontier for prepaid deals. The federal Inflation Reduction Act contains $270 billion to extend for 10 years generous tax incentives like those that enable investors in solar and wind projects to book up to a third of their costs as federal tax credits.



“[Renewables bonds are] creative and could be just as popular as gas. Right now, it’s a supply issue,” says Eve Lando, a portfolio manager at Santa Fe, New Mexico–based Thornburg Investment Management, which handles $40 billion, including $6.8 billion in muni bonds.



It’s possible that even natural gas deals could one day get the green stamp of approval. In July, the European Union added the fossil fuel—along with nuclear power—to its green, or climate-friendly, list. “Natural gas is a savior of sorts when it comes to bringing down emissions. Converting from coal to gas is a huge positive,” asserts Black Belt CEO Matthew McKinley, who says Black Belt is considering renewables, including methane, which can be captured from landfills or extracted from bovine “emissions” in dairies. Such “biogas” sources are considered carbon-negative because methane is a far worse warming gas than CO2, and capturing it prevents it from wafting into the atmosphere.



Bankers will win with “green” natu-ral gas or renewables like wind and solar. Some Wall Street giants have already gone upstream and gained expertise developing wind, solar and battery systems, incentivized by generous federal investment tax credits. Over the past five years, Goldman Sachs Renewable Power has built an enormous portfolio of 850 renewable energy projects that generate 2,300 megawatts and $300 million a year in revenue. In June Goldman spun off the division as MN8 Energy, which now is planning an IPO.



Goldman declined to comment for this story, but the bank’s California customers are enthusiastic. “We are looking to retool this solution to bring down the cost of renewable energy,” says Michael Callahan, associate general counsel of Marin Clean Energy and general counsel of CCCFA. “Prepayments in electricity is an extension of gas prepayments, and a bigger opportunity.”



By , Christopher Helman &amp; Matt Schifrin, Forbes Staff

Markets Open After Falling More 800 Points On Tuesday

How Wall Street Banks Will Reap Billions From Tax-Free Renewable Energy Bonds

Francis Dufay, the Acting CEO of Jumia Group, on how it became Africa’s leading e-commerce platform. 



By Marie Shabaya



Africa’s veteran unicorn, Jumia Group, made waves in 2019 when they became the first technology company from the continent to list on the New York Stock Exchange (NYSE). Today, they’re a powerful brand with a presence in 11 countries on the continent. However, their success has been a decade in the making.



“Jumia’s inception was inspired by the tremendous opportunity that exists in Africa. When we launched 10 years ago, there was [almost] no e-commerce presence in Africa, and we had to build the entire marketplace from scratch, with a focus on our logistics platform and payment platform,” Jumia Group’s recently installed Acting CEO, Francis Dufay, tells FORBES AFRICA.



The e-commerce giant’s early entry into the African virtual marketplace not only enabled them to help shape new online markets but also to adapt as each of the countries where they operated developed.



“It is important to note that while many consumers and vendors are quite eager to adopt e-commerce, each country does so at its own speed&#8230;clearly, many countries of the continent are at a crucial juncture in their development. They have made great strides over the past few decades, but there’s still work to be done. It is essential to ensure that our future growth is inclusive and benefits all consumers in Africa, and technology will play an important role.”



This birds-eye view of the e-commerce sector has been part and parcel of Jumia’s triumph and has supported an ever-expanding digital ecosystem of buyers and sellers which has won them a loyal following.



“Despite the challenges [we] faced when we first entered the African market, we are now the leading e-commerce platform in Africa. We are proud that, in 2021, around 100,000 active sellers, including local African companies and entrepreneurs, [who] have partnered with Jumia to attract millions of consumers. Jumia employs over 4,000 people across 11 countries. Additionally, we have strong brand awareness with 1.1 billion visits in 2021 and have 50 million products available on our platform,” explains Dufay.



Their undisputed popularity and brand loyalty has, understandably, evoked comparisons to other established internet titans like Amazon or Alibaba. However, while the company welcomes these plaudits, Jumia stands firm in the uniqueness of its identity as an African brand.



“Although we are a major player in the world of e-commerce, we operate in a continent that is vastly different from Asia and North America. Jumia’s deep understanding of economic, technical, geographic, and cultural complexities across Africa enables the company to offer an e-commerce solution that strives to address the vast needs and preferences of both sellers and consumers.”



Part of this distinctive African identity is Jumia’s extensive logistics network, which accounts for a huge portion of their business alongside their proprietary payments platform, JumiaPay. The company has, as part of their operations, dedicated warehouses, pick-up stations, and more than one hundred local third-party logistics service providers, which allows for last-mile delivery and an extensive reach. Impressively, 27% of their packages are delivered to rural areas.



Undoubtedly, Jumia’s deep understanding of the continent’s business culture has also accounted for continued growth. This has placed the company at the very fabric of customers’ lives.



“In Africa, e-commerce provides a solution for the daily needs of the consumer. Since Africa has a significant unbanked population as well as some legacy mistrust of e-commerce, it has been important for Jumia to have programs in place such as Payment-on-Delivery. It’s something unique for e-commerce. Our focus on everyday product categories such as fashion, beauty and personal care is key to positioning us at the heart of everyday consumption in Africa,” notes Dufay.



Expanding this further, Jumia Group announced an exciting logistics partnership with American drone delivery service, Zipline, within their West African markets. At the same time, they’ve opened two new Tech Centers in Egypt and an additional planned in Kenya in the near future. These movements will not only further the company’s operations on the continent but support them in building an all-important talent pipeline to underpin further growth.



Going forward, the e-commerce platform plans to continue reinforcing its continental roots and is looking forward to being part of the African internet story, for decades to come.



“Overall, we are absolutely convinced that we have the right strategy to build the winning e-commerce platform in Africa, and to take Jumia to profitability. The strong momentum we’re seeing on our platform usage and the traction we have with brands and sellers give us further confidence in the great opportunity we have ahead of us and our ability to capture the largest slice of this growing pie,” says Dufay.



– Look out for FORBES AFRICA’s comprehensive cover story on <a href="https://shop.forbesafrica.com/product/single-digital-issue-dec-jan-2023/" target="_blank" rel="noreferrer noopener">‘Rise of the Unicorns’.</a>


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Screenshot 2022-12-04 at 19.33.41

How This Unicorn Made It In Africa: ‘Technology Has The Potential To Transform Everyday Life On The Continent’

Like stock certificates sprinkled with pixie dust, inflated exchange tokens were at the core of FTX’s spectacular collapse. They are still in widespread use at major cryptocurrency exchanges around the world. Will they be crypto’s undoing?



In2017, cryptocurrency exchange Binance created the first of a new kind of blockchain-minted digital asset: BNB coin, designed to reward customer behavior such as trading or referring friends to its own platform. “A model for building a scalable, and impactful cryptocurrency business,” heralded CoinDesk editor Pete Rizzo in 2019, after Binance moved the coin to its own proprietary blockchain. “Unbelievable brilliance.”



Today, the only unbelievable thing about the whole cloth of crypto inventions known as exchange tokens, like BNB, is that they have inflated to tens of billions of dollars in value and in large part have become the foundation upon which the fast-growing digital-assets markets rest.



The weakest link in former billionaire Sam Bankman-Fried’s crypto empire was FTX’s own exchange token, which traded under the symbol FTT. According to Reuters, Bankman-Fried had lent his trading company, Alameda,&nbsp;<a href="https://www.reuters.com/markets/currencies/exclusive-least-1-billion-client-funds-missing-failed-crypto-firm-ftx-sources-2022-11-12/" target="_blank" rel="noreferrer noopener">billions of dollars</a>&nbsp;in FTX customer funds, collateralized by these FTT tokens, which were essentially invented as a way to offer trading discounts and other perks.



“The way that FTT works,” said Bankman-Fried in an August 2022 interview with&nbsp;Forbes, “It is not that you get free FTT for doing things. The way to think about it is that you get free shit for having FTT. So, there&#8217;s a bunch of doo-hickeys.”



At the peak in 2021 FTT had a market value of $9.6 billion, but unlike a common stock, which represents legal ownership in the assets of a corporation, FTT does not represent any equity ownership in the FTX company. If FTT had any intrinsic value, it was in the form of discounts that FTX customers using these tokens could get trading on the exchange–as much as 60% for active traders. You can think of these exchange tokens as being akin to loyalty or reward points you might get as a frequent customer of Starbucks or the UnitedMiles by flying on that airline. They have value, but it&#8217;s unlikely that a bank would allow you to use them as collateral if you wanted to purchase a home.&nbsp;



However, in the highly speculative and often bizarre world of digital assets, these loyalty tokens trade on numerous crypto exchanges just as stocks do on the New York Stock Exchange, and FTX founder Sam Bankman-Fried reportedly used them as collateral for the loans his company made. Up until a week ago FTT traded at $26 and had a market capitalization of $3.5 billion. But after Bankman-Fried’s rival Changpeng Zhao, Binance’s billionaire founder, went on Twitter to say he was planning to sell over $500 million of FTT, it sparked the crypto equivalent of a bank run. Today FTT sells for $2.70, and given FTX’s recent bankruptcy filing, it is likely headed to zero.



But the story of exchange tokens in cryptoland is far from over. Forbes counts more than 16 global crypto and DeFi (decentralized finance) exchanges currently using these tokens for a combined market value of no less than $62 billion. 



In fact, so-called exchange tokens are an important underpinning to the crypto exchange ecosystem because they are effective in creating customer loyalty–especially when token prices are rising. Virtually all such tokens offer holders exchange-specific perks such as trading fee discounts, preferential margin loan terms, enhanced rewards for staking (lending) and exchange-branded cashback Visa cards. Exchange tokens are also awarded to customers that refer new traders to a platform, in a system similar to multi-level marketing organizations like Amway. Exchange tokens function as the fuel for crypto’s self-fulfilling bubbles.



Binance–the largest crypto exchange in the world–has its own token, BNB, which by itself has a market capitalization of $45.9 billion, though it does not represent any equity in Changpeng Zhao’s company nor has it been registered as a security with the U.S. SEC.&nbsp;



Anyone who opens an account on Binance and starts trading can buy or earn these BNB tokens, which offer 25% discounts on spot and margin transaction fees and 10% on futures. If you refer friends, you can get up to 40% commission every time they make a trade on Binance. Also, because Binance has created its own blockchain that mints BNB coins, you can use BNB to pay for goods and services, book airfare and hotels on sites like Travala for instance, participate in exclusive token sales and even earn free tokens by completing surveys and tasks. You can also put BNB to use by staking, earn a flexible percentage yield by depositing it on BNB Chain-based projects and apply for crypto loans. Notably, these digital assets are also essential for anyone who want to use Binance’s decentralized exchange (DEX), which theoretically can’t be shut down by U.S. regulators.



Unlike bitcoin, which is mined every ten minutes, all of the 350 million FTT tokens that would ever exist were created in what is known as a pre-mine. “There will never be any more minted,” said Bankman-Fried recently. In fact, over a period of about three months starting around June of 2019 almost all of FTT’s premined tokens were sold prior to getting listed on crypto exchanges. “Effectively, all of the FTT tokens were owned by a collection of people and entities,” said Bankman-Fried.



In order to create scarcity and essentially bolster the value of its exchange tokens, FTX and Binance conduct what are known as token burns. Periodically both exchanges send tokens to irretrievable addresses reducing the float, similarly to a share buyback, and thus increasing the value of the exchange tokens outstanding. Since 2019 FTX has burned 21 million FTT tokens. In total, Binance has burned more than 42 million BNB, which would be worth $11.6 billion at today’s prices. CZ has said Binance doesn’t borrow money and has never used BNB as collateral on loans. He recently began advocating that exchanges undergo a “proof” of funds.&nbsp;



In terms of governance, exchange tokens, like loyalty reward programs, are completely under the control of the entity that issues or redeems them, even if they profess to stick to pre-arranged schedules for issuance or burning. DeFi tokens, by contrast, claim to offer holders the ability to propose and vote on platform changes. But in reality, many large DeFi platforms concentrate governance in the hands of big investors and founding teams. Additionally, just as FTT did not give holders stakes in FTX, purchasing a DeFi token does not necessarily convey ownership rights into the underlying platform.&nbsp;



The table below offers details on some 16 different cryptocurrency and DeFi-platform exchange tokens representing more than $60 billion in market value. Conspicuously absent are Coinbase and Kraken, which are U.S.-based and have avoided issuing exchange tokens, presumably because they would likely be deemed securities by the SEC. All of the tokens listed trade on exchanges daily like stocks–most of them have plummeted in value in the last year—but not a single one offers any ownership in the companies that they are affiliated with. Buyer beware.



<h4 class="wp-block-heading" id="h-token-values">TOKEN VALUES</h4>



<h4 class="wp-block-heading" id="h-the-16-crypto-and-defi-exchanges-below-created-exchange-tokens-to-attract-and-retain-customers-though-they-trade-like-stocks-and-have-a-value-of-over-60-billion-none-represent-ownership-in-their-affiliated-platforms">The 16 crypto and DeFi exchanges below created exchange tokens to attract and retain customers. Though they trade like stocks and have a value of over $60 billion, none represent ownership in their affiliated platforms.</h4>



<figure class="wp-block-table"><table><tbody><tr><td>Exchange </td><td>Token Symbol</td><td>Headquarters</td><td>MARKET CAPITALIZATION ($ million)</td><td>12-MONTH PRICE CHANGE </td><td> TOKEN UTILITY AND PERKS </td></tr><tr><td>Binance</td><td>BNB</td><td>none, &#8220;remote first&#8221; </td><td>$45,977 </td><td>-55% </td><td> Trading discounts, access to earning higher rewards and token sales, VISA card rewards from VISA merchant network, better loan terms </td></tr><tr><td>OKX</td><td>OKO</td><td>Seychelles</td><td>$4,651 </td><td>-31% </td><td> Trading discoounts, access to token sales, payment from crypto to network of merchants </td></tr><tr><td>Uniswap **</td><td>UNI</td><td>New York</td><td>$4,188 </td><td>-78% </td><td> UNI tokens govern a platform that rewards members through revenue sharing of fees earned. </td></tr><tr><td>Crypto.com </td><td>CRO</td><td>Singapore</td><td>$2,024 </td><td>-78% </td><td> Trading discounts, Crypto.com VISA rewards on purchases, higher yield on staking, revenue sharing, access to buy rare collectible NFTs </td></tr><tr><td>Tokenize Xchange</td><td>TKX</td><td>Singapore</td><td>$803 </td><td>-16% </td><td> Trading discounts and possibly free trading when combined with VIP program, double earning program access, zero fee withdrawals </td></tr><tr><td>Huobi</td><td>HT</td><td>Seychelles</td><td>$699 </td><td>-47% </td><td> Trading discounts of up to 65% when combined with VIP program, HT staking yield of 2.5%, network revenue sharing </td></tr><tr><td>Kucoin</td><td>KCS</td><td>Seychelles</td><td>$693 </td><td>-68% </td><td> Trading discounts, KuCoin VISA rewards on purchases, higher yield on staking, earn KCS based on network activity </td></tr><tr><td>Whitebit</td><td>WBT</td><td>Lithuana</td><td>$682 </td><td>na</td><td> Trading discounts up to zero cost trading with higher WBT balances </td></tr><tr><td>PancakeSwap **</td><td>CAKE</td><td>Japan</td><td>$590 </td><td>-78% </td><td> Earn CAKE for free with high interest rates, stake CAKE and earn free tokens, access to win collectible NFTs </td></tr><tr><td>BTSE</td><td>BTSE</td><td>British Virgin Islands</td><td>$562 </td><td>-41% </td><td> Trading discounts, referral bonus boost, chances to earn bonuses, access to select asset management offers </td></tr><tr><td>Gate.io</td><td>GT</td><td>none, 100% remote</td><td>$538 </td><td>-52% </td><td> Zero trading fee, access to exclusive offers, voting activities, liquidity mining benefits </td></tr><tr><td>Synthetix Network **</td><td>SNX</td><td>Australia</td><td>$392 </td><td>-83% </td><td> SNX staking generates rewards through the network&#8217;s &#8220;inflationary monetary policy&#8221; and through transactions in staked US dollars (sUSD). </td></tr><tr><td>FTX</td><td>FTT</td><td>Bahamas</td><td>$262 </td><td>-97% </td><td> Trading discounts, staking benefits include higher referral rates and revenue sharing, earn and burn FTT weekly </td></tr><tr><td>MEXC Global</td><td>MX</td><td>Seychelles</td><td>$87 </td><td>-69% </td><td> Trading discount, MX burn program participation, referral rewards, access to M-Day events and new MEXC launchpad projects. </td></tr><tr><td>Bidget</td><td>BGB</td><td>Singapore</td><td>$27 </td><td>na</td><td> Trading discount, earn KOL partnership rewards </td></tr><tr><td>BitMart</td><td>BMX</td><td>Grand Cayman</td><td>$16</td><td>-76% </td><td>Trading discount, deflationary token</td></tr></tbody></table><figcaption>*A decentralized exchange. Source: Coinmarketcap, CoinGecko, Forbes, exchange sites.</figcaption></figure>



By Nina Bambysheva, Javier Paz, Michael del Castillo and Steven Ehrlich, Forbes Staff

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As the new head of The Firm, Charles now oversees some $42 billion in assets and inherited $500 million from Queen Elizabeth, including her castles, jewels, art collection and a horse farm—all of it tax-free.



When you’re a member of the House of Windsor, going into the family business may come with a lifetime of prestige and privilege, but it doesn’t always bring great wealth. Even&nbsp;<a href="https://www.forbes.com/sites/arielshapiro/2021/03/10/inside-the-firm-how-the-royal-familys-28-billion-money-machine-really-works/?sh=69a224792bcc">members of The Firm</a>—as high-ranking royals have been known since the days of King George VI—are often dependent on their elders for allowances, gifts and other blue-blooded handouts.



But it’s still good to be the king.



After training for the position for more than 70 years, King Charles III inherited large swaths of land, regal estates, rare jewels, paintings and other personal property—some going back centuries—from his mother, Queen Elizabeth II. He also now oversees the late monarch’s $42 billion portfolio of assets held in trust for the kingdom, including billions in investments—and other opulent palaces, glittering jewels and priceless art that he will never actually own.



Her Majesty’s will is expected to be sealed for at least 90 years so the exact distribution of her assets will not be known for several generations. But as her eldest son, Charles inherited the Queen’s private estates—her much-loved castle in Balmoral, Scotland, where she died, as well as Sandringham in eastern England, home to the thoroughbred horse farm known as the Royal Studs. King Charles is also expected to inherit her enormous private collection of jewelry, art, rare stamps and any personal investments. Altogether, Forbes values these personal assets at $500 million. And Charles won’t have to pay a shilling of inheritance tax, <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/208633/mou_royal_taxation.pdf" target="_blank" rel="noreferrer noopener">thanks to a 1993 agreement with the British government</a> that exempts transfers of property from one sovereign to another.



The 73-year-old monarch also accedes the throne with a king’s ransom of his own, largely through the lucrative annual income he received from the Duchy of Cornwall, which earned him some $27 million this year and which his eldest son, Prince William, will now inherit. As Prince of Wales, Charles launched several ventures to protect the environment and foster organic farming. Through his Charitable Foundation (which William also inherits now), Charles owned <a href="https://www.waitrose.ae/en/inspiration/facts-about-waitrose-duchy-organic/" target="_blank" rel="noreferrer noopener">the largest organic food brand in the U.K.</a>, as well as <a href="https://zalan.transylvaniancastle.com/" target="_blank" rel="noreferrer noopener">a nature retreat and crafts center in Transylvania</a> that each operate as bed and breakfasts.



Prince William will now take possession of the Duchy of Cornwall, a conglomerate with $1.2 billion in net assets including the Oval cricket ground in London, Charles’ former residence at Highgrove House (<a href="https://duchyofcornwall.org/home-farm.html" target="_blank" rel="noreferrer noopener">where he first began farming organically in 1985</a>) and the Isles of Scilly, but the new King will not exactly be left wanting for prime real estate.



As the new monarch, Charles assumes ownership of institutions that manage an estimated $42 billion in assets, including some of the world’s most famous royal palaces and the Crown Jewels. These assets—which include Buckingham Palace, Windsor Castle and the Tower of London—aren’t held directly by the King, but are instead owned by the reigning monarch&nbsp;<a href="https://www.rct.uk/sites/default/files/resources/Financial%20Statements%202021-22.pdf" target="_blank" rel="noreferrer noopener">“in right of the Crown”</a>&nbsp;for the duration of their reign. They are also held “in trust” for his successors and the nation—meaning they can’t actually be sold.



In contrast to the various estates, which file annual reports, the palaces and jewels are often thought of as priceless. So what’s it all worth? Forbes gave it a royal effort.



The single most valuable asset held by King Charles is the Crown Estate, a sprawling real estate portfolio with $17.5 billion in net assets. Those properties include Regent Street, London’s prime shopping destination, as well as Ascot Racecourse (a favorite of the Queen) and virtually the entire seabed of the U.K. All of the Crown Estate’s net profit—$361 million in fiscal year 2022—goes to the British Treasury. But the royal family also gets a cut: They receive an allowance from the Treasury known as the “Sovereign Grant,” equal to 25% of the net profit for the financial year two years earlier. In 2022, the Sovereign Grant amounted to $99.6 million, based on the Crown Estate’s net profit in the 2019-20 financial year.



That enormous windfall doesn’t go directly to Charles, however. A 10% cut of that net profit—$39.8 million for 2022—is set aside for maintaining Buckingham Palace, and an additional 15% is used to finance the royal family’s annual travel, formal events, housekeeping and payroll. And those bills add up fast.



The most expensive trip taken by the royals in the past year, for instance, was Prince William and Kate’s nine-day visit to Belize, Jamaica and the Bahamas in March, which cost roughly $260,000, including planning prior to the visit.



The Sovereign Grant isn’t Charles’ only source of income. For one, it doesn’t cover physical security. As King, he also gains control of the Duchy of Lancaster, a private estate with $753 million in net assets that is owned in trust by the monarch. The Duchy’s net revenues go directly to the King as an allowance called the Privy Purse, which covers any other official expenditures. (In 2022, that amounted to $24 million, pre-tax.) Unlike the Sovereign Grant, which is tax-free, the Queen agreed in 1993 to voluntarily pay income tax on the portion of the Privy Purse not used for official purposes—and Charles agreed to maintain the same policy upon his accession.



In addition to the Crown Estate and the Duchy of Lancaster, Charles also holds the Crown Estate Scotland, a portfolio with some $570 million in net assets, including the Scottish seabed, rural estates and the rights to fish wild salmon and extract naturally occurring gold and silver in Scotland.



The rest of the Crown’s holdings—at least nine former and current royal residences and the Royal Collection, which includes the Crown Jewels—are the most difficult to value because they would never reach the open market and they don’t file annual reports.



The Crown Jewels are perhaps the most identifiable asset associated with the British royal family. As part of the Royal Collection, they are&nbsp;<a href="https://www.hrp.org.uk/tower-of-london/history-and-stories/the-crown-jewels/" target="_blank" rel="noreferrer noopener">“held in trust by the monarch for the nation.”</a>&nbsp;The Royal Institution of Chartered Surveyors&nbsp;<a href="https://www.facebook.com/watch/live/?ref=watch_permalink&amp;v=424129088352731" target="_blank" rel="noreferrer noopener">estimated their value at $4 billion in 2019</a>, using the sale of the French Crown Jewels in 1887 and the sale of the late Princess Margaret’s jewelry in 2006 as a comparison.



The overall value of the Royal Collection, which includes works by Rembrandt, Vermeer, Caravaggio and Leonardo Da Vinci, is unquestionably much higher. <a href="https://brandirectory.com/download-report/bf_monarchy_report_2017.pdf" target="_blank" rel="noreferrer noopener">According to a 2017 report by Brand Finance</a>, a U.K.-based brand valuation firm, the Royal Collection—including the Crown Jewels—is estimated to be worth $12.7 billion.



There are also at least nine palaces, castles and residences owned by the King in trust as sovereign or “in right of the Crown.” According to estimates provided by Lenka Dušková Munter, a sales specialist for historical properties at Czech real estate agency Luxent, and Colby Short, co-founder and CEO of estate agent website GetAgent.co.uk,&nbsp;Forbesestimates the combined value of these properties at $9.5 billion.



The most valuable property in the collection is, of course, the King’s official London residence, Buckingham Palace, estimated at $4.9 billion. On the lower end, there’s Clarence House, Charles’ formal residence in London when he was Prince of Wales, valued at $72 million. Balmoral and Sandringham, which are now personally owned by the King after he inherited them from Queen Elizabeth, are worth $118 million and $73 million, respectively.https://embedly.forbes.com/widgets/media.html?src=https%3A%2F%2Fe.infogram.com%2F175bfdcf-5cb6-459e-abe7-e249671ebeae%3Fsrc%3Dembed&amp;display_name=Infogram&amp;url=https%3A%2F%2Finfogram.com%2Fcrown-estate-1hdw2jpqvwgzp2l&amp;image=https%3A%2F%2Finfogram-thumbs-1024.s3-eu-west-1.amazonaws.com%2F8a98e4e4-a70a-4ed7-b3df-efd2ab8724ae.jpg&amp;key=cfc0fb0733504c77aa4a6ac07caaffc7&amp;type=text%2Fhtml&amp;schema=infogram



Most of these assets cannot be sold. But in choosing Charles as his regnal name, the new King would be wise to remember what happened to King Charles I’s worldly possessions—after he was beheaded by his people in 1649.



Following Charles I’s death during the English Civil War, his assets were promptly auctioned off—&nbsp;<a href="https://www.crouchrarebooks.com/prints/richmond-palace" target="_blank" rel="noreferrer noopener">Richmond Palace in London reportedly sold for £13,000</a>&nbsp;(or about $1.8 million today) before ultimately being demolished. Parliament also sold Charles I’s art collection, considered at the time to be one of the greatest in the world.&nbsp;<a href="https://lostcollection.rct.uk/charles-i/inventories" target="_blank" rel="noreferrer noopener">The appraised value of £35,000 for the paintings alone</a>—some $5 million adjusted for inflation—is a fraction of&nbsp;<a href="https://www.christies.com/features/Salvator-Mundi-timeline-8644-3.aspx" target="_blank" rel="noreferrer noopener">the $450 million paid at auction for just one of those works,</a>Leonardo Da Vinci’s Salvator Mundi, when it became the most expensive painting ever sold in 2017.



Presumably Charles III’s reign will go a little more smoothly than his regal namesake. The new King has seen a surge in support since his mother’s death.&nbsp;<a href="https://www.thetimes.co.uk/article/charles-benefits-from-a-wave-of-public-goodwill-wtwvgvbtg" target="_blank" rel="noreferrer noopener">A YouGov survey for the&nbsp;Times of London&nbsp;published Tuesday</a>&nbsp;found that his approval rating has jumped to 63% since May, when only 32% of respondents believed he would do a good job as the monarch.



“The queen was obviously very well regarded globally and inside the U.K.,” says David Haigh, chief executive of Brand Finance. “She did an extremely good job. And the jury’s out as to whether or not Prince Charles will live up to her example.”



<h2 class="wp-block-heading" id="h-the-king-s-personal-assets">THE KING’S PERSONAL ASSETS</h2>



As the new King, Charles inherits the Queen’s personal assets, which&nbsp;Forbesestimates at $500 million. That includes Balmoral and Sandringham, the Royal Philatelic Collection—which includes&nbsp;<a href="https://postalmuseum.si.edu/exhibition/the-queen%E2%80%99s-own" target="_blank" rel="noreferrer noopener">“the world&#8217;s finest and most comprehensive collection of British and Commonwealth stamps”</a>—personal investments, horses, jewelry and artworks Her Majesty inherited from her mother in 2002. The prize painting in that collection is said to be Claude Monet’s&nbsp;Study of rocks, Creuse,&nbsp;<a href="https://www.theguardian.com/uk/2002/apr/03/queenmother.monarchy2" target="_blank" rel="noreferrer noopener">reportedly worth as much as $17.3 million.</a>&nbsp;And assuming Charles’ late father, Prince Philip, had a smart estate tax attorney, the Duke of Edinburgh would have bequeathed his own art collection—<a href="https://www.goodreads.com/en/book/show/55355783-the-queen-s-true-worth" target="_blank" rel="noreferrer noopener">estimated at $2.3 million by the late royal commentator and journalist David McClure</a>—to the Queen upon his death in April 2021 to avoid paying inheritance tax. If he did, those assets also likely passed on tax-free to Charles.



There is also a vast collection of cars, watches and other extravagant toys held by the King and the royal family. On Sunday, on the first full day of his reign, King Charles turned up to greet crowds at Buckingham Palace wearing an 18-carat gold Parmigiani Fleurier Toric Chronograph watch that he’s owned since the mid-2000s, the Swiss watchmaker told Forbes. Parmigiani Fleurier no longer produces the Toric Chronograph, but <a href="https://onlineonly.christies.com/s/christies-watches-online/parmigiani-fleurier-18k-toric-chronograph-date-ref-c00940-260/67585" target="_blank" rel="noreferrer noopener">a similar model sold at Christie’s for $8,125 in 2019.</a>



The King’s vehicle of choice for his London debut was his mother’s Rolls Royce Phantom VI, which was&nbsp;<a href="https://www.royal.uk/wedding-princess-eugenie-and-jack-brooksbank-bridal-car" target="_blank" rel="noreferrer noopener">presented to her for her Silver Jubilee in 1977</a>. While the car is not for sale, a&nbsp;<a href="https://www.hemmings.com/classifieds/cars-for-sale/rolls-royce/phantom-vi" target="_blank" rel="noreferrer noopener">similar model from 1976 can be purchased for $225,000.</a>&nbsp;Charles also inherits the Bentley State Limousine,&nbsp;<a href="https://www.bentleymotors.com/en/models/mulliner/coachbuilt/queens-limousine.html" target="_blank" rel="noreferrer noopener">originally designed for the Queen’s Golden Jubilee in 2002</a>&nbsp;to commemorate her half-century on the throne.



In his 64 years as Prince of Wales, Charles also learned how to build his own outrageous fortune. He largely depended on income from the Duchy of Cornwall, which expanded under his tenure to $1.2 billion in net assets, including nearly $400 million in commercial properties and more than 52,000 hectares of land, or about a third the size of Greater London. Between 2011 and 2022, the Duchy’s net assets grew by 51%.



The profits from those assets provided Charles with enough income to be independent of the Sovereign Grant: In the fiscal year ending March 31, 2022, the then-Prince of Wales earned some $26.6 million (pre-tax) from the Duchy of Cornwall, compared to $1.2 million from the Sovereign Grant.



That valuable asset is now in the hands of Prince William, who succeeded his father as the Prince of Wales. With Cornwall, William will no longer have to ask his father for a cut of his income anymore. Prince Harry, on the other hand, is forging ahead with his own business ventures along with his wife, Meghan Markle. In December 2020, the couple signed a three-year <a href="https://www.forbes.com/sites/dawnchmielewski/2021/02/26/how-much-are-prince-harry-and-meghan-markle-worth-surprisingly-not-that-much/">podcasting deal with Spotify that could be worth between $15 million and $18 million</a>. The couple also has an Apple TV+ series on mental health that Harry executive produces with Oprah Winfrey for an undisclosed sum and a <a href="https://www.forbes.com/sites/arielshapiro/2021/03/10/inside-the-firm-how-the-royal-familys-28-billion-money-machine-really-works/?sh=7e7ff0042bcc">$100 million, five-year Netflix deal, which was signed in September 2020</a>.



After all, leaving the royal family isn’t usually a smart financial move: When Queen Elizabeth’s uncle, King Edward VIII,&nbsp;<a href="https://www.royal.uk/edward-viii" target="_blank" rel="noreferrer noopener">abdicated in 1936 to marry the twice-divorced Wallis Simpson</a>, he was cut off from the Civil List, the royal funding stream now known as the Sovereign Grant. Instead, he negotiated a&nbsp;<a href="https://books.google.com/books?id=-IhnAAAAMAAJ&amp;focus=searchwithinvolume&amp;q=25%2C000" target="_blank" rel="noreferrer noopener">deal with his brother, King George VI, to receive £25,000 a year ($1.4 million adjusted for inflation.</a>)&nbsp;Still, at the time of his death in 1972, the Duke of Windsor (as he became known) left behind&nbsp;<a href="https://www.nytimes.com/1972/12/05/archives/duke-of-windsor-leaves-18800-estate-in-england.html" target="_blank" rel="noreferrer noopener">a fortune worth nearly $2.5 million</a>—$17.7 million today—including a villa in Paris.



Charles’ personal assets before he became king are far murkier. He’s also received scrutiny for investments made through the Duchy of Cornwall. In 2017, the International Consortium of Investigative Journalists’&nbsp;<a href="https://www.theguardian.com/news/2017/nov/07/prince-charles-profit-best-friend-hugh-van-cutsem-offshore-firm-paradise-papers" target="_blank" rel="noreferrer noopener">Paradise Papers investigation revealed that the Duchy of Cornwall had invested millions of pounds</a>&nbsp;in offshore funds and companies, including a business registered in Bermuda run by Hugh van Cutsem, an old friend from the University of Cambridge in the 1960s. At the time, the Duchy said Charles didn&#8217;t have any &#8220;direct involvement in investment decisions.”



As King, Charles now holds $500 million in personal assets with another $42 billion held in trust as the sovereign. Despite an obviously luxurious lifestyle with access to multiple castles, fleets of cars, private planes and a pretty great collection of tiaras and other jewelry, there is one thing that King Charles III shares with every commoner—death and (some) taxes.



By Giacomo Tognini &amp; Carlie Porterfield, Forbes Staff

State Opening Of Parliament

How Rich Is King Charles III? Inside The New Monarch’s Outrageous Fortune

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Serial entrepreneur Bill Smith launched Landing in 2019. The furnished apartment rental firm expects $200 million in revenue this year by catering to the work-from-anywhere generation.



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Bill Smith steers his black Tesla X through the streets of downtown Birmingham, Alabama, and pulls into a low-rise apartment complex.



“This used to be a brothel 100 years ago,” he says, with a smile.&nbsp;



Today, it’s a modern, renovated building, and one of dozens in this old industrial city where his company, Landing, rents fully-furnished, flexible-lease apartments. A thin man with intense blue eyes, Smith, 36, steps into a sunny one-bedroom, with a railroad layout that goes for $1,800 a month, a 20% premium to what it would rent or empty. It’s decorated with innocuous furniture, inoffensive linens, even taupe-colored dishware, all designed and manufactured by his team. “Someone wants to move into an apartment in five days, we have to be able to acquire it and make it beautiful in a short period of time,” he says, “It looks really simple on the outside, but it’s very complex.”&nbsp;



As the way Americans live and work has changed, Landing offers its members (who pay $199 a year) instant access to move-in-ready apartments with the flexibility to rent for as short as one month. Cheaper than a hotel or a corporate apartment and more predictable than an Airbnb, Landing markets itself to Millennials with the flexibility to work remotely, as well as to others (traveling nurses, empty nesters, those new to a city) who don’t want the hassle of figuring out housing and buying furniture for a temporary stay.&nbsp;



The bulk of Landing’s $200 million revenue (2022, projected) comes from the 20%-to-50% markup that it charges over its cost of leasing apartments from owners of multi-family buildings including mega-landlords like Greystar and American Landmark. It operates in 81 markets across the country, but its biggest are fast-growing Sunbelt cities like Las Vegas, Phoenix, Austin, Atlanta, Nashville and Tampa.&nbsp;



Smith sold his previous company, online grocery delivery service Shipt, to Target for $550 million in 2018. But he sees a much bigger opportunity with Landing: according to his aggressive estimates, perhaps 10% of the 40 million Americans who live in apartments could choose flexible-stay, furnished homes within a decade.&nbsp;



“Covid pulled forward a change in living that I thought would take five years,” says Smith. “We think we’ll be doing $1 billion in revenue by 2025….and we’ll still be just scratching the surface of the opportunity.”&nbsp;



Landing founder Bill Smith in one of the company&#8217;s apartments in Birmingham, Alabama: &#8220;I can&#8217;t rent apartments for $8,000 a month so the furniture needs to be the lowest cost possible and very high quality.&#8221;JAMEL TOPPIN FOR FORBES



Landing has raised $237 million in VC funding, including $75 million (previously undisclosed) at a recent valuation of $475 million. Not bad for a company whose revenue hit $83 million in 2021, up six-fold from 2020 revenue. But not as much as he hoped, especially given his track record and revenue growth. “If it was December, we’d already be in the billion-dollar club,” notes Smith, who says raising money in this market has “not been fun.” One silver lining to remaining a non-unicorn: Landing still qualifies for a spot on this year’s Forbes Next Billion-Dollar Startups list as one of 25 venture-backed companies we think most likely to reach a $1 billion valuation.&nbsp;



As WeWork’s rise and fall showed, there’s both huge potential in new models of real estate—and enormous risk. Smith is working to manage the risk and operational complexity with data, and lots of it. What cities have both demand and potential profitability? How can they cut installation costs? Adjust pricing and marketing for seasonality? “This needs to be tech-driven and not people-driven,” Smith says, who relies on his firm’s data and its own proprietary algorithm. “I truly believe this is the only way this model will work.”&nbsp;



Smith, who owns roughly one-third of Landing and is worth an estimated $400 million including cash from Shipt, is up for the challenges: “I get bored really easily.&nbsp;I’m attracted to solving these complicated problems.”&nbsp;



Smith grew up in Birmingham, the son of a Cellular One agent and a medical transcriptionist. Smith recalls asking for a briefcase for his birthday at age five and later lugging his desktop computer to his dad’s home for weekends after his parents divorced.&nbsp;



He wasn’t much interested in school (“I hated it. I really did,” he says) and at age 16 he dropped out. He’d already been selling Nextel phones after school, and, as he recalls, making $4,000 or more a month, a tidy sum for a teenager in Alabama. In 2009, he founded Insight Card Services, offering reloadable prepaid Visa cards. Five years later, at 28, he sold that business to bank-holding company Green Dot for tens of millions.&nbsp;



As a young millionaire, he started snapping up local real estate. He showed up at an auction to buy 33 condos (since sold) and then decided on the spot to bid for seven floors in a pre-war former bank headquarters known as the John Hand Building. His winning bid: $510,00. “I am like, ‘Oh my gosh, what did I just win?’” he says. “The luck was that I started Shipt and was able to fill it up.” (It’s now Landing’s headquarters).&nbsp;



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<blockquote class="wp-block-quote is-style-large">“Bill Smith is very unassuming, very different from your Adam Neumanns and your Travis Kalanicks.”&nbsp;</blockquote>



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In 2014, Smith launched Shipt to offer same-day delivery to customers who ordered groceries online, investing $3 million of his own money. By 2016, Shipt was available in 27 cities across nine states—challenging Amazon and Instacart, especially in smaller markets. With an ownership stake of roughly 50% at the time of the $550 million sale to Target, he was now seriously rich. “It didn’t feel like a huge life change even though from the outside it would appear that way,” he says. “I live in the same house and go to the same places and do the same things I did before.”&nbsp;



Smith keeps a list of 30-some ideas for businesses in his phone, and after he left Target (as part of the deal, he worked for the retailer for 15 months) he started thinking about which one to tackle next. Venture capitalists were eager to fund whatever it was. “If he told me he was doing moon exploration, I probably would have given him money,” says Greycroft’s Ian Sigalow, who led Shipt’s first outside funding round at a pre-money valuation of $45 million and subsequently invested in Landing.&nbsp;



His first try, called Homesie, targeted homeowners who needed repairs, letting them text for help. “It was a total flop,” he says. “We tested it for a few weeks, and literally no one signed up.” Smith shuttered it almost immediately and moved on, transforming the website’s operations and concept into Landing. “Consumer companies are either a rocket ship or they’re not, and if it’s not a rocket ship I don’t want to waste any time on it,” he says.&nbsp;



The basic idea for Landing had been in his phone for years. During his brief time as a landlord of those 33 condos, he’d seen how often medical residents at the University of Alabama at Birmingham would take apartments they needed for just a year. And his own experience moving temporarily to San Francisco, one of America’s toughest housing markets, in 2016 while building Shipt, rankled. “I was on Craigslist trying to find a place that was going to work for my family, and it was just a huge headache,” he recalls.&nbsp;



As people gained more flexibility on where to live, he wanted to make it easier for them to pick up and move to furnished, flexible-lease apartments that didn’t cost corporate rates. As with Shipt, Smith put up some initial cash, ultimately investing $15 million.&nbsp;



The launch of Landing was tough. Smith was personally juggling the demands of a startup with those of his youngest child (he has three), who was born with special needs in June 2018 and required multiple surgeries. Then, in March 2020, Covid hit, offices shut down and Landing’s fate hung in the balance.&nbsp;



All of this has helped keep Smith humble, according to Landing’s CFO Casey Woo. “Bill Smith is very unassuming. He’s very different from your Adam Neumanns and your Travises,” says Woo, referring to WeWork’s founder (and his former boss) and Uber’s Kalanick. “You generally get the ego or you get less killer instinct.”&nbsp;



While the potential is enormous, Landing faces plenty of competition: from venture-backed startups in the flexible, furnished rental space like New York City-based Blueground and San Francisco’s Zeus Living to hotels that have moved further into extended-stay options. Even Airbnb is pushing long-term stays for remote workers, with stays of 28 days or longer being its fastest growing category in 2021.&nbsp;



Running a business like this is also capital intensive. In addition to the equity raised, Landing has secured $150 million in credit to help pay for everything from the leases and technology to furniture and shipping. To maximize profitability, it uses the algorithm to help fill the apartments, constantly gauging demand, scouting locations and setting prices in real time. Right now it says it has 7,000 apartments with occupancy rates hovering around 90% but admits profitability is still a few years off.&nbsp;



Rather than sign leases with landlords upfront, risking vacancies if no one rents, Landing relies on software to list apartments first, then signs leases and sets them up with furniture within a few days once it has a renter. Having learned from WeWork’s troubles with long-term leases, Landing inks one-year leases with property owners, allowing it to quickly reset prices or exit properties that no longer make sense. “What’s made Landing so successful is that we operate on demand,” says Marcus Higgins, the company’s chief operating officer, who previously worked for SoftBank-backed Oyo Hotels. “This is a giant Rubik’s cube, and as soon as you get a couple of things right, you have to turn it and do it again.”&nbsp;



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<blockquote class="wp-block-quote is-style-large">High school dropout Bill Smith is worth more than $400 million from his startups Shipt and Landing.&nbsp;</blockquote>



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That is particularly challenging given the nomadic nature of Landing’s customers. For instance, Kendyl Cochran, a 25-year-old business development director at Gartner, spent most of the past year living in Landing apartments with her boyfriend and dog after learning about the company on TikTok. “We wanted to do 12 cities in 12 months,” she says. After an initial Airbnb stay, they lived in Landing apartments in Atlanta, Baltimore, Austin, Dallas, Denver, Tucson and Salt Lake City, typically spending $2,200 to $2,400 a month on rent. It was great for them but every time they moved out, Landing had to find folks to move in for the remaining months on the lease.&nbsp;



As for the cookie-cutter design, that’s a key part to keeping costs down. The firm manufactures its furniture at factories in Vietnam where costs are lower.&nbsp;Then it ships them back&nbsp;to a 280,000-square-foot warehouse in Moody, Alabama. It also has smaller warehouses in Las Vegas, Austin and Lakeland, Florida.&nbsp;



Controlling design&nbsp;meant flexibility&nbsp;when ocean freight costs skyrocketed: the firm’s kitchen chairs are now stackable, allowing it to jam more of them into&nbsp;a&nbsp;shipping container. A new line of furniture in the works includes coffee tables and side tables that will be assembled locally in Alabama rather than shipped that way to save on freight. By using its own trucks and drivers and standardizing everything, Landing has shaved installation costs of by more than 60% since launch, according to CFO Woo.&nbsp;



The big question, of course, is how many people will want to live in temporary housing, month-to-month, and whether the mobility of the pandemic for white-collar workers will not only continue but remain popular enough to make the financials work. “The world of work right now [is in] a massive period of experimentation,” says Steve Cadigan, a future of work consultant and author of “Workquake,” who was LinkedIn’s first chief HR director. “The digital nomad has a shelf life until you want to settle down and have kids. The older we get the more we like continuity.”&nbsp;



Smith is, of course, much more bullish, figuring that the housing market is so big that even capturing even his own small sliver will be a huge home run. Says he: “Not everyone is going to live like this, and not even the majority will, but millions of Americans are going to live flexibly.”&nbsp;



<a href="https://www.forbes.com/sites/amyfeldman/"></a>By Amy Feldman, Forbes Staff

Screenshot 2022-08-15 at 13.17.34

This High School Dropout Sold Shipt To Target For $550 Million. His Next Startup Could Be Worth Double.

A new Forbes survey of the world’s richest people found many still do household chores like taking out the garbage and grocery shopping.&nbsp;



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The world of the super wealthy may be brimming with private jets, mega mansions and more dough than most could even dream of, but the day-to-day lives of billionaires look a whole lot more typical than many would expect.&nbsp;



That’s at least according to the results of a recent survey by&nbsp;Forbes. The poll of 65 of the richest people on Earth found that, while they could easily outsource, many billionaires still choose to do at least some household chores and other domestic tasks themselves. More than a third said they regularly grocery shop and take out the garbage, while 40% cook and walk their dogs. More than half of the respondents said they watch their children or grandchildren’s sports games. (Perhaps it’s the competitive instinct.)&nbsp;



Still, these ultra-rich have their limits, the survey suggests. Clearly greenbacks do not correlate with green thumbs as just 10% or those polled reported doing yardwork on a regular basis. The only task less popular was laundry, which just 8% of the billionaires said they tend to do.&nbsp;



There are a myriad reasons why at least some members of the superrich still do these ordinary tasks. Amazon founder Jeff Bezos and Microsoft cofounder Bill Gates–the world’s No. 2 and No. 4 richest people worth an estimated $146.8 billion and $105 billion, respectively–have both previously discussed their habits of washing the dishes every night. “Other people volunteer, but I like the way I do it,” Gates&nbsp;<a href="https://www.reddit.com/r/IAmA/comments/1xj56q/hello_reddit_im_bill_gates_cochair_of_the_bill/?st=itofjv6g&amp;amp%3Bsh=19fc7cd0" target="_blank" rel="noreferrer noopener">reasoned</a>&nbsp;simply in a 2014 Reddit Q&amp;A.&nbsp;



For some, like real estate investor&nbsp;<a href="https://www.forbes.com/profile/charles-cohen/?sh=5e81ceeb50f8">Charles Cohen</a>, whose estimated $3.6 billion empire includes high-end office buildings in New York City and the movie theater chain Landmark Theatres, doing chores is a way to relax outside of work. “It’s funny you bring this up because I’m just driving back from Home Depot right now with some extra sprinklers and light bulbs,” Cohen said in a recent phone call. “I like going out and doing stuff on my own.”&nbsp;



The real estate mogul described tasks like grocery shopping and grilling as a “great way to break up the week.” Cohen said he grew up in the Westchester suburbs of New York with a housekeeper, and that he and his wife try to do more of the work around the house in part to set an example for their children. “It’s all about doing the things you enjoy doing and creating a lifestyle that defines the way you are and the way you want your children to perceive you, and the values you want them to embrace,” Cohen said. (Not that he and his family live a frugal life. They own a 39-acre Connecticut estate with a&nbsp;<a href="https://www.architecturaldigest.com/story/an-expansive-connecticut-estate-becomes-an-idyllic-retreat" target="_blank" rel="noreferrer noopener">private screening room</a>&nbsp;and a vineyard in France.)



<hr class="wp-block-separator"/>



<h4 class="wp-block-heading" id="h-which-of-these-activities-do-you-do-regularly">WHICH OF THESE ACTIVITIES DO YOU DO REGULARLY?</h4>



<h4 class="wp-block-heading" id="h-insights-from-our-exclusive-survey-of-65-global-billionaires-just-how-normal-is-a-day-in-the-life-of-a-billionaire-well-more-typical-than-you-might-expect-with-more-than-a-third-doing-routine-tasks-like-cooking-and-grocery-shopping-but-folding-clothes-forget-about-it">Insights from our exclusive survey of 65 global billionaires. Just how normal is a day in the life of a billionaire? Well, more typical than you might expect, with more than a third doing routine tasks like cooking and grocery shopping. But folding clothes? Forget about it.</h4>



46%&nbsp;ATTEND KIDS’ OR GRANDKIDS’ SPORTS GAMES OR PERFORMANCES&nbsp;



40%&nbsp;COOK&nbsp;



40%&nbsp;WALK THE DOG&nbsp;



38%&nbsp;TAKE OUT THE GARBAGE&nbsp;



33%&nbsp;SHOP FOR GROCERIES&nbsp;



19%&nbsp;TAKE THE KIDS OR GRANDKIDS TO SCHOOL&nbsp;



10%&nbsp;YARDWORK&nbsp;



8%&nbsp;LAUNDRY&nbsp;



<hr class="wp-block-separator"/>



<blockquote class="wp-block-quote is-style-large" id="h-if-success-changes-you-then-i-think-you-ve-missed-the-whole-point-of-life">“If success changes you, then I think you’ve missed the whole point of life.” —Frank VanderSloot</blockquote>



<hr class="wp-block-separator"/>



<a href="https://www.forbes.com/profile/frank-vandersloot/?sh=211210d14ee3">Frank VanderSloot,</a>&nbsp;the founder and executive chairman of the health and wellness business Melaleuca, and the richest person in Idaho, said doing household chores feels natural to him because of the way he grew up. The son of a railroad worker, VanderSloot recalls waking up before school to chop wood and milk the cows on his family’s farm in northern Idaho.



“People think that you’re a different person because of the size of your checking account, but it doesn’t work that way, at least I don’t think it does,” said VanderSloot. He noted that he and his wife, Belinda, hired someone to help with cleaning around the house, which has 15 rooms to accommodate their 14 children and 54 grandchildren when they come to visit. But he and his wife handle most household chores, including cooking and laundry; they pay their grandchildren to do their yardwork.&nbsp;



“I think that wealth or success will test your character more than failure ever could, and you’ve got to measure up to that,” he emphasized. “If success changes you, then I think you’ve missed the whole point of life.”&nbsp;



Yet another billionaire, who asked for his comments to remain anonymous, told&nbsp;Forbeshe does everything from taking out the trash to washing his clothes—“yes, even laundry and occasional ironing”—because he is “just not comfortable accepting personal services from others.”&nbsp;



<hr class="wp-block-separator"/>



<blockquote class="wp-block-quote is-style-large" id="h-i-m-running-a-multi-billion-dollar-business-i-have-a-lot-going-on-so-it-s-obviously-not-the-best-use-of-my-time-to-be-doing-stuff-around-the-house-that-i-could-hire-someone-to-do">“I’m running a multi-billion dollar business. I have a lot going on, so it’s obviously not the best use of my time to be doing stuff around the house that I could hire someone to do.” —Jeff Greene</blockquote>



<hr class="wp-block-separator"/>



Not everyone has quite the same philosophy. After all, as the survey indicates, the majority don’t do all these chores: 60% said they don’t cook; 62% said they don’t take out their garbage and 92% don’t do laundry. Some may have good reasons.&nbsp;<a href="https://www.forbes.com/profile/jeff-greene/?sh=6232cd2513ed">Jeff Greene</a>, the Palm Beach-based real estate mogul who first made his fortune shorting subprime mortgages during the Great Recession, insists that while he’s “pretty down to earth,” most household chores and tasks are handled by his staff. “I’m running a multi-billion dollar business. I have a lot going on, so it’s obviously not the best use of my time to be doing stuff around the house that I could hire someone to do,” he said.&nbsp;



When he has time outside of work, Greene said he prioritizes spending time with his three young children, who he drives to and from school each day. “We’re very involved with our kids,” he said, adding: “It’s nice to do … Compared to fighting with some contractor about a deadline, I’d rather be stuck with my kids.” 



 By <a href="https://www.forbes.com/sites/jemimamcevoy/"></a>Jemima McEvoy, Forbes Staff

Still life of a small shopping cart and a golden apple on pink background

Inside The Daily Lives Of The Super Rich—And Why Many Billionaires Still Do Chores

On May 25, 2020, George Floyd died before our eyes as a police officer knelt on his neck for approximately 9 minutes on a street in Minneapolis. Had Darnella Frazier, then 17, not captured the murder on her cell phone and posted it to Facebook, Floyd would have been yet another Black man to die in police custody – a statistic. Instead, George Floyd became a powerful symbol of persistent inequality and systemic injustice against Black Americans and a wake-up call for all. The response was historic – from the scores of leaders making forceful statements every day about racial justice to the <a href="https://www.forbes.com/sites/janicegassam/2021/09/03/its-going-to-take-more-than-donations-to-fix-corporate-americas-systemic-racism/?sh=1dd4057e19a1">$50 billion </a>that U.S. companies pledged (but not necessarily paid) to support Black communities. To understand the complexities of where we stand as a nation, though, look no further than the <a href="https://www.forbes.com/sites/maiahoskin/2022/05/16/say-their-names-here-are-the-victims-of-the-buffalo-hate-crime-shooting/?sh=4989663552cd">racially motivated mass murder</a> at a Buffalo grocery store on May 14. In an effort to capture the reality of being Black in America, we decided that we wanted to hear from leaders in the community. Here are some of their reflections on the post-Floyd era.



<h2 class="wp-block-heading" id="h-deray-mckesson">DeRay McKesson</h2>



“We spend a lot of our time battling misinformation from police.”



McKesson is executive director of Campaign Zero, which works with policymakers across the U.S. to reduce police violence.



George Floyd’s death really did reshape the conversation about police violence. I was in the streets in 2014, and we fought people for years to get them to believe that there was a problem. When George Floyd was killed, people just got it.



Two years later, we’ve accomplished a lot. We’ve helped enact laws in 19 states around the use of force. Every single state now has restricted or banned no-knock raids — we wrote those laws. We did the first repeal of the law enforcement officer bill of rights in the country’s history in Maryland. This work is not sexy, but it will save people’s lives.



We spend a lot of our time battling misinformation from police, who are trying to convince elected officials that our proposals make them less safe. Early on, policymakers stopped ceding ground to police. Over the past year, the uptick in crime hasn’t helped our cause.



I don’t have any comment about the ‘defund the police&#8217; slogan. I don’t see any win in commenting. I will say that part of our work as activists is not to be so arrogant as to believe that the only way to enter is the way we enter. I can enter from ‘defund’ and it doesn’t stress me out. Some people can’t enter from ‘defund.’ That doesn&#8217;t mean that they don’t love Black people and don’t care about our work. When I talk to my aunt – she’s in Baltimore, where there’s a lot of crime – I can’t talk about defunding the police. Because she’s not hearing me. And if she doesn’t hear me, then I can’t do any of my best work.



<h2 class="wp-block-heading">Sheryl Lee Ralph</h2>



“When I walk onto sets, I see more young, Black faces.”



Ralph is a Tony award-winning actress, best known for her roles on TV hits&nbsp;Abbott Elementary, Moesha&nbsp;and&nbsp;Ray Donovan.



When I entered the film industry as a teenager in the 1970s, I remember Sidney Poitier gifting me a makeup box with everything I’d need to do my makeup. This was because, once I left the support of our set, many stylists on other sets wouldn’t know how to make up a Black actress. He apologized that the industry did not have much to offer me because he felt, with my talent, I deserved more.



With that in mind, I didn’t expect much change to occur in the entertainment industry after George Floyd’s death. I am a child of the ’60s. I saw horrible things. So when the incident happened with George Floyd, I thought, ‘Oh, here we go.’



But I do see change. And I’ve been pleasantly surprised. Now, when I walk onto sets, I see more young, Black faces. I see hair and makeup artists hired to work with Black talent and others. And I see members of Generations Z and X promoting mental health while fighting for racial justice and equality, like my son, Etienne Maurice. He started a nonprofit called WalkGood LA to help people of color heal from the anger they felt after the deaths of Ahmaud Arbery and George Floyd.



There is so much more work to be done, specifically around policing and requiring body-worn cameras to keep officers accountable. What has taken 300 years to solidify itself in the thread of our country cannot be undone in two years. We&#8217;ve got more work that we must and can do.



<h2 class="wp-block-heading">Theodore V. Wells Jr.</h2>



“The underpinnings of our democracy are under attack.”



Wells is co-chair of the litigation department at Paul, Weiss, Rifkind, Wharton and Garrison LLP, chairman emeritus of the NAACP Legal Defense and Educational Fund and one of the country’s top trial lawyers.



I try to be optimistic but it’s tempered by the reality of history and current events. At this moment in time, the underpinnings of our democracy are under attack. There are formal efforts to suppress Black voting rights and a real possibility that the Supreme Court will ban affirmative action in higher education next term. We have income inequality across racial groups and many Black youth trapped in subpar schools while the problems of mass incarceration are only being addressed at the margins.



I was born in 1950 and came of age during the civil rights movement. If somebody had told me at 18 that we would still be fighting in 2022 with such intensity about violence against Black men and women, I’m not sure I would have believed it.



I have come to believe that the struggle for racial equality will continue over many generations. Progress is an aspirational goal, but it is not guaranteed. What is scary is that you now have people saying that we should not be discussing slavery or Jim Crow in our schools because it is uncomfortable. Until this nation, both Black and white, is willing to have an honest discussion about its history of systemic and institutionalized racism, we are going to find it difficult to make real progress.



The George Floyd moment for my generation was Emmett Till, a 14-year-old Black boy who was murdered and hung in Mississippi because he allegedly whistled at a white woman. The people who lynched him were acquitted by an all-white jury. Many Black children of my generation were drilled on how you could be murdered for the mere fact of being a Black person in the wrong place at the wrong time. That lesson continued with George Floyd and Ahmaud Arbery. Unlike in the Emmett Till case, their murderers were convicted. But the violence continues, as we saw earlier this month in Buffalo. I want to believe that we are mourning this tragedy together, that the outrage will lead to change. You have to try to temper your frustration and despair with hope and optimism.



<h2 class="wp-block-heading">Bozoma Saint John</h2>



“In that moment, I didn’t care about the appearance of being the angry Black woman.”



Saint John is a Hall of Fame marketing executive, author, entrepreneur and the former global chief marketing officer at Netflix.&nbsp;



A few days after George Floyd was murdered, I had to present at a roundtable of CMOs. Each of us was asked to present three things that we thought were important for our audiences or for our companies. Everybody was saying all these amazing things from very diverse points of view. About halfway through, though, I realized I didn’t care about any of those things at that moment. When it was my turn, I said, “There are things I want for us as a community of C-suite executives. Number one: Be enraged. Number two: Be enraged. Number three: Be enraged.” I said it with my voice shaking and a cry at the back of my throat.&nbsp;



In that moment, I didn&#8217;t care about the appearance of being the angry Black woman. I wanted everybody to see it and ask themselves why they weren&#8217;t enraged, too. I hadn&#8217;t challenged my own peers in that kind of visceral way before.



Prior to Floyd’s murder, we hadn’t had companies make public statements about anything, really – except for something like a natural disaster. But we hadn’t had companies make statements about racial reckoning. That was not a thing. And to be quite honest, I was so shocked by it.



I think there is a responsibility for companies to do more to advance racial equity. I understand why we are very sensitive to performative action. But even if a company is performative to whatever degree, they&#8217;re still laying a foundation to build on. It is our job as a society to make sure that we keep that performance accountable. If we think it’s performative, put some pressure against it. It’s just like science. If I put pressure against this thing and it’s actually a facade, it will fall.



<h2 class="wp-block-heading">Harvey Mason Jr.</h2>



“I&#8217;m very conscious of how I move as someone who hopefully can open the door for others.”



Mason Jr. is a Grammy-nominated record producer, songwriter, movie producer and CEO of The Recording Academy.



I think people have an awareness that they should have had before but didn’t. Many come to me, asking how they can help. Awkward as that sometimes is, they’re speaking from the heart. I’m very conscious of how I move as someone who hopefully can open the door for others. Hopefully, we can set a tone that then makes a change that can last and have impact.&nbsp;



When I’m on a Zoom call, talking to a studio about a film, and half the faces I see on screen are people of color, I know those people are going to rise through the ranks at that company. One might become a chief creative officer or CEO, and that’s going to trickle down to have a tremendous impact on the content that those studios produce. That will then trickle down to have a tremendous impact on the people who watch it, which might shape the opinions and perspectives those consumers have about a certain race or gender.&nbsp;



That’s going to be ultimately what changes the world and changes behavior and changes the hearts and minds of people. That’s why I love my job and why I love making art. By the time people watch it or hear it or listen to it or dance to it or sing it, they’re getting a dose of empathy and understanding.



<h2 class="wp-block-heading">Ryan Williams</h2>



“In some cases, you’re seeing things go backwards in terms of minority representation.”



Williams is cofounder and CEO of Cadre, a technology-driven real estate platform that aims to make commercial real estate accessible to a wider number of investors.



What has changed since George Floyd’s murder? Conversations like this have changed. Personally, this was not a discussion that I was comfortable having a couple years ago. And I don&#8217;t think a lot of folks in the media were comfortable having it either.&nbsp;



I’ve realized that I need to be more of a multidimensional leader. It’s not enough just to make sure we’re growing and building the leading platform for individuals to access real estate. I also need to talk about the communities we’re investing in, and start thinking more about my employees, my team and the communities they came from.



The biggest things that haven’t changed since two years ago are the numbers related to underrepresented minorities being board members, founders and CEOs. In some cases, you’re seeing things go backward in terms of minority representation and control in governance at large companies.



Institutional investors like pensions and university endowments play a huge role in how capital gets allocated. They’re not pounding the table and asking the venture capital funds they invest in, ‘What does your portfolio look like today?’ They’re not asking VCs, ‘How many Black partners do you have?’



<h2 class="wp-block-heading">Songe LaRon &amp; Dave Salvant</h2>



“I don’t think the onus should be on Black people, frankly, to fix these problems.”



LaRon and Salvant are the co-founders of Squire Technologies, which provides software and services to barber shops nationwide.



LARON: After George Floyd died, there was a lot more attention paid to the lack of funding that Black founders receive, relative to founders [who are] white and other races. There was more attention to the challenges that Black entrepreneurs experience. Prior to 2020 I think that was something that was talked about in Black circles but not so much outside. It sparked a dialogue. Did that dialogue and awareness translate into change that can be tracked and traced? I don’t know to what extent that’s happened.



SALVANT: As African-American founders, the more successful we are, the more we give other people chances. Investors and people are greedy and that trumps everything. If they’re making money with you, they invest more and look for similar assets to invest in. The responsibility we have is to be as successful as possible, and hopefully our success brings more opportunity in the future.&nbsp;



LARON: I don’t think the onus should be on Black people, frankly, to fix these problems. These are American issues. America needs to solve these issues. I think it’s good to have the conversation, but not just with Black founders. It’s as much of a white issue – more of a white issue, frankly. It’ll be interesting to see how white founders deal with this. How are they responding? What are they saying?



<h2 class="wp-block-heading">Ward Connerly</h2>



“I did not see Floyd’s murder as a racial interaction. ”



Connerly is president of the American Civil Rights Institute, a group critical of affirmative action programs, and a former University of California regent.



When George Floyd was murdered, my reaction was one of shock and disbelief — disbelief that law enforcement had allowed such brutal tactics to intrude into the everyday practices of their officers. I did not see Floyd’s murder as a racial interaction. That was instantly the characterization of it by many, but I did not see it that way. And to this day, I don’t really see it that way.



I think that, as a society, we are so obsessed with race that we look for it often. There are those who have views that are contrary to mine who manufacture that perception. It is almost as if it is in their best interest, based on their ideological view or their station in life, to identify transactions among us as being racial.&nbsp;



If we want to get beyond race, then we should get beyond race. That’s part of what I thought the election of Senator Barack Obama as President Barack Obama was about: post-racial. Not a country of Black and white, red America, blue America. But an America, post-racial. We didn&#8217;t move in that direction, but I&#8217;m still – at 83 almost – trying to gallop toward that before I leave. 



<h2 class="wp-block-heading">Frances Tiafoe</h2>



“I definitely like where we’re going, but it’s a long road ahead for sure.”



Tiafoe is the 27th-ranked men’s tennis player in the world and the only Black American male in the ATP Tour’s top 100 rankings.&nbsp;



At the time of Floyd’s death, I was one of the few Black American tennis players. When I made it to the fourth round of the U.S. Open a few months later, I came out with a Black Lives Matter mask and shirt. The fact that the U.S. Open let that happen was unbelievable. I felt like my guys were definitely behind me. To speak about racism and Floyd’s murder on such a big platform. It was huge.&nbsp;



I would like to encourage more people who look like me to play the game of tennis. That would be great for the sport. It comes down to people in power to move the needle. All you need is a basketball and hoop to play basketball and all you need is a field and a football to play football. There’s no stringing rackets, no shoes, no certain clothing needed, no traveling outside your community.&nbsp;



There definitely has been a shift in the right direction. Black people are doing much more for their communities, for places where they grew up in – at least where I’m from in D.C. I see a lot more help in lower-income areas. People are generally trying to do more, showing good representation, showing kids that this is bigger than just what’s right around them. But we need to see people of color getting great jobs, getting great opportunities in high places. I definitely like where we’re going, but it’s a long road ahead for sure.



<h2 class="wp-block-heading">Joy Buolamwini</h2>



“What matters is not the technology but how it’s used.”



Buolamwini, whose groundbreaking work on AI bias earned her a PhD from MIT Media Lab, is founder of the nonprofit research group Algorithmic Justice League.



I started AJL in 2016 to share research on how technology could perpetuate colorism, racism and other forms of discrimination. When George Floyd was murdered, it brought an intense focus on racial disparities and policing practices, including surveillance technologies that we’ve studied&nbsp;such as facial recognition.&nbsp;So it didn’t take long for policymakers, decision-makers and street leaders to reach out to us and ask for advice.&nbsp;



My organization is opposed to the use of technology for mass surveillance. The George Floyd video is not an example of Orwellian surveillance, recorded by some higher authority watching over people. Instead, it was sousveillance that’s recorded from below by the less powerful who are watching over the authorities as a check on power. It’s the young woman who wielded the camera against police brutality in a defiant, brave and visible act. It is important not to conflate an act of resistance with the invasive use of camera networks for mass surveillance. What matters is not the technology but how it’s used.&nbsp;



I’m encouraged to see the government be more transparent and seek expert advice on the impact of technology on our communities through increased testing and the creation of the National AI Advisory Committee. But there is so much more to do. The government also needs experiential expertise from those who have been harmed by technology. We need more enforceable rules and regulations of technology that can be used to discriminate, whether it’s who gets hired, arrested or prioritized for a kidney transplant.&nbsp;



Floyd’s murder underscores for me that racial justice requires algorithmic justice. We cannot have racial justice when technology discriminates against us.

Celebration Of The Sentence Of Former Police Officer Derek Chauvin As Guilty Of The Murder Of George Floyd

Two Years After George Floyd, Black Leaders Reflect On Change

<h3 class="wp-block-heading" id="h-backed-by-timbaland-and-nas-imelda-walavalkar-s-los-angeles-based-cannabis-brand-leans-into-the-joy-of-getting-stoned-and-having-fun">Backed by Timbaland and Nas, Imelda Walavalkar’s Los Angeles-based cannabis brand leans into the joy of getting stoned and having fun.</h3>



In 2017, three friends from New York moved to Los Angeles to reimagine the cigarette. But the kind of smokes Imelda Walavalkar, her husband, Tracy Anderson, and art director Irwin Matutina wanted to make would contain no tobacco—just marijuana.



“Personally, I think it’s an iconic form factor,” says Anderson, who helped launch Bob Marley’s cannabis brand, Marley Natural. “The cigarette, it’s beautiful.”



The three soon founded Pure Beauty, a boutique cannabis brand that specializes in high-end, environmentally friendly grown herb that’s rolled into marijuana cigarettes, complete with a wood pulp filter. Today, its bestselling product is a box of mini pre-rolled joints the company lovingly refers to as “Babies.”



The cannabis legalization movement owes its growth—37 states now allow for some kind of legal sales—to medical marijuana. But for Walavalkar, Anderson and Matutina, they felt as if there weren’t enough brands just trying to have fun and get people stoned. Many cannabis entrepreneurs often cite deeply personal stories about&nbsp;<a href="https://www.forbes.com/sites/willyakowicz/2022/04/20/nba-star-al-harrington-viola-100-black-cannabis-millionaires/?sh=c49ea45451af">how marijuana helped a loved one battle an illness</a>, while others have virtuous narratives about wanting to heal the world with a plant bestowed by the gods. But for the founders of Pure Beauty, weed is all about kicking back.



“We are unabashedly recreational,” says Walavalkar. “It&#8217;s okay to want to get high just for the sake of getting high.”<a href="https://www.forbes.com/sites/willyakowicz/2022/06/10/dutchie-the-cannabis-industrys-highest-flying-software-company-falls-back-to-earth/" target="_blank" rel="noreferrer noopener">MORE FROM FORBESDutchie, The Cannabis Industry&#8217;s Highest-Flying Software Company, Falls Back To EarthBy&nbsp;Will Yakowicz</a>



In many ways, Pure Beauty, which&nbsp;<a href="https://www.lacma.org/art/exhibition/john-baldessari-pure-beauty" target="_blank" rel="noreferrer noopener">takes its name from the artist John Baldessari</a>, is a typical startup. The brand launched in a South Central Los Angeles garage with a $30,000 cigarette rolling machine and went through dozens of different types of paper—one burned too quickly, another too slow—until they landed on a marijuana cigarette that felt and smoked just right.



In its first year, Pure Beauty had around $200,000 in sales, most of which were drummed up by Anderson, who drove around L.A. in the company’s minivan, selling jars of pot and packs of joints to dispensaries. But by the end of 2017, it landed its first big order:&nbsp;<a href="https://www.forbes.com/sites/javierhasse/2021/12/21/medmen-opens-first-store-since-management-shakeup-bostons-fenway-park-gets-new-cannabis-dispensary/?sh=750f3c3e17c4">MedMen</a>&nbsp;wanted $100,000 worth of Pure Beauty cigarettes.



“To us, it was all hands on deck, working all day and all night, double shifts,” says Walavalkar, who is the company’s CEO. For two weeks, the founders marshaled a “cadre of help” composed of dozens of friends of friends, fed them burritos and tacos and worked around the clock. Pure Beauty met the deadline, but realized it had to scale up—their bootstrapped operation wouldn’t be able to meet future demand.



During Hall of Flowers in 2019, a cannabis trade show in Santa Rosa, California, David Mars, an investor with New York-based White Owl Capital, came across Pure Beauty’s booth. He was struck by its clean, minimalist design and intrigued by its sustainable cultivation methods. The brand’s 22,000-square-foot grow site in Sacramento is off the grid, generating electricity through microturbines and boasts nearly net-zero water usage—HVAC units and dehumidifiers pull moisture from the air to water the plants.



Mars says he sees Pure Beauty as a “stand-alone, national brand” that has created an authentically chic and cool vibe. “I think they would fit into a portfolio at LVMH,” says Mars, who eventually invested in the company.



Pure Beauty has raised a total of $7 million from Gron Ventures, Subversive Capital, Ceres Group Holdings, White Owl—all cannabis investors—and has also been able to get musicians Timbaland and Nas to open their wallets.



In 2020, the company generated what&nbsp;Forbes&nbsp;estimates to be around $20 million in revenue and last year Pure Beauty pulled in $44 million. The California-based company has now expanded to Michigan, through a deal with Gage, which has about a dozen dispensaries in the state.



At Cornerstone Wellness, a 15-year-old cannabis shop in L.A., Pure Beauty products don’t stay on the shelves for long. “I think very few brands hit the marks—a really well-designed package, an eco-conscious brand, woman-owned and an art-forward company; it’s refreshing,” says Cornerstone Wellness founder Erica Kay. “Their pre-rolls have been a smash product for years now and are always selling out. You can’t keep enough.”<a href="https://www.forbes.com/sites/willyakowicz/2022/04/20/nba-star-al-harrington-viola-100-black-cannabis-millionaires/" target="_blank" rel="noreferrer noopener">MORE FROM FORBESHow Former NBA Star Al Harrington Is Building A $100 Million Team Of Black Cannabis EntrepreneursBy&nbsp;Will Yakowicz</a>



Pure Beauty also makes a THC beverage “enhancer” called the Little Strong Drink, or LSD for short. The 2-ounce bottle is packed with 100 mg of THC from live resin from high-grade buds and is made with Concord grapes, cardamom, Egyptian hibiscus and Ashwagandha grown in India.



Cannabis beverages currently made up around 1% of the $25 billion in legal cannabis sales last year, but Big Alcohol is moving into the space quickly. (Boston Beer Co.&nbsp;<a href="https://www.forbes.com/sites/willyakowicz/2022/05/23/boston-beer-co-launches-teapot-cannabis-infused-iced-tea/">is launching a THC-infused iced tea</a>&nbsp;in Canada.) For Walavalkar, who admittedly “loves weed,” beverages are a way to bring a session into the family backyard without the stigma of smoking.



“My parents won’t smoke a joint, but they’ll have a beverage,” says Walavalkar. “The ceremony of drinking is still inculcated in our culture. If you&#8217;re at a barbecue, there&#8217;s no ceremony around handing out a gummy to everybody. The beverage doesn’t have that stigma [like a joint] and anyone can engage in that way.”



For now, Pure Beauty is still a small, boutique brand, but the founders have successfully harnessed&nbsp;<a href="https://www.forbes.com/sites/zackomalleygreenburg/2019/07/26/beboe-cannabis/?sh=69f59f241069">a coolness factor reminiscent of Beboe</a>, which sold to cannabis giant Green Thumb Industries for $80 million in 2019. In an industry that is increasingly dominated by corporate brands, Pure Beauty is a repudiation of market research-driven products developed through a series of focus groups, says Anderson.



“We threw it all out and followed our intuition,” says Anderson. “We’re doing it from a true sense of self and art and culture and things that we really care about.”



Walavalkar believes many companies justify cannabis use by focusing too heavily on the medicinal benefits. For Pure Beauty, the strategy is to help destigmatize pot by admitting that getting stoned is fun. “The beauty of getting high is that it makes you happy, it gives you a perspective shift, similar to art,” says Walavalkar. “That perspective shift for me is a wellness thing—it’s more about the joy of getting stoned.”



<a href="https://www.forbes.com/sites/willyakowicz/"></a>By Will Yakowicz, Forbes Staff

Friends passing joint

Forget Weed For Wellness, Pure Beauty Wants To Get You High

A pair of twentysomethings from Uganda and Ghana thought there was a fortune to be made bringing transnational financial services to Africa’s 1.2 billion people. With 5 million users, San Francisco-based Chipper Cash is just getting started.



It was the summer of 2018, and Ham Serunjogi, a 24-year-old Ugandan immigrant, thought the pitch he was making to a Palo Alto venture capi­tal firm was going well. He had explained how his fintech startup, Chipper Cash, would enable African consumers to send money to each other, across national borders, more cheaply and easily than the antiquated banking system—a sort of Venmo for the continent.



Then came a question from one of the partners: “Why don’t you go look for donations and grants to fund this?” Because, Serunjogi replied, this will be a profit-making business. The clueless partner persisted: “Why don’t you talk to Unicef or an impact investing firm?” Serunjogi discreetly declines to name the firm, or to say which VC later told him that “regardless of what the metrics are, I have to apply a discount to this business because it’s in Africa.”



Those memories still sting, even though Chipper Cash has now raised $300 million from a roster of blue-chip VCs, most recently in November at a $2.2 billion valuation. “These were things I’d have to take with a straight face. But it was outrageous, and it still is,” Serunjogi says from the San Francisco office where he, cofounder Maijid Moujaled and nearly a fifth of the company’s 350 employees are based. The two founders each have an estimated 10% stake in Chipper, translating into paper fortunes north of $200 million.



Sheel Mohnot, a former partner at 500 Startups—Chipper Cash’s first backer—chalks up some early investor resistance to ignorance about Africa. “No one was investing in Africa at the time,” he says. That has changed. Per CB Insights, venture capitalists invested $1.5 billion in African fintech companies last year, up sevenfold from 2020. Sub-Saharan Africans today have 605 million registered mobile money accounts—with which they can send cash via text message—up from 469 million in 2018. That makes the area fertile ground for more advanced consumer financial apps.



Four years after its founding, Chipper Cash has 5 million registered users in seven countries, including Uganda, Ghana and Nigeria. It offers not only low-cost money transfers but bill payment, crypto trading and the ability to buy U.S. stocks. Excluding crypto transactions, it booked more than $75 million in revenue in 2021, compared with $18 million in 2020.



The idea for Chipper Cash was seeded when high-school-age Serunjogi saw the problems his father encountered trying to move money through Africa’s ossified banking system. Serunjogi’s family lived in Gayaza, a Ugandan town 10 miles outside Kampala, the capital. His parents owned a farm, and his father also ran an IT operation helping local businesses set up networks. Though hardly rich, the family sent Serunjogi and his two brothers to a private high school and enrolled them in a competitive swim club. In 2010, Serunjogi, then 16, made the Ugandan Youth Olympic team. After having problems completing a bank transfer, his father was forced to fly to South Africa with an envelope full of cash to pay his son’s swim coach while they were training there.



After high school, Serunjogi followed his older brother to Grinnell, a small liberal arts college in Iowa known for its strong academics, where both swam varsity. At Grinnell he met Moujaled, a Ghanaian computer science major who had started a popular student coding group. Almost immediately, the two began talking about developing an African money transfer app. But first they wanted real-world tech experience and needed work visas. So during his junior year Serunjogi sent cold emails to Mark Zuckerberg and Sheryl Sandberg and snagged an internship with Facebook, which turned into a full-time job in Dublin after he graduated in 2016.



In the spring of 2018, Serunjogi texted Moujaled, who was working as a software engineer in San Francisco, to say it was time to get going. Serunjogi quit his job and moved into Moujaled’s studio apartment, sleeping on an air mattress in the kitchenette. The two used their combined savings of less than $30,000 and Moujaled’s ongoing salary as seed capital. They&nbsp;<a href="https://digestafrica.com/chipper-cash-money-whatsapp" target="_blank" rel="noreferrer noopener">launched</a>&nbsp;a test version of their app in July 2018, letting customers send money from Uganda to Ghana for free.



They took pitches to more than 50 VC firms until, in November 2018, 500 Startups agreed to invest $150,000. Before the papers were signed, Mohnot wired $40,000 to Chipper after Serunjogi told him he was about to miss rent. “I will be eternally grateful to him for that,” Serunjogi says.



Chipper’s free, easy-to-use app was a big improvement over the available alternatives. For example, Kenya’s M-Pesa, which launched in 2007, charges <a href="https://www.safaricom.co.ke/personal/m-pesa/m-pesa-rates" target="_blank" rel="noreferrer noopener">1% to 2%</a> for many domestic transfers.



By mid-2019 Chipper Cash was available in Uganda, Ghana, Kenya and Rwanda. It soon expanded to Nigeria, Africa’s biggest market with more than 200 million people, and by the end of the year, it had 600,000 customers. It also introduced a foreign-exchange markup fee of 2% to 5% to start generating revenue. As bitcoin rose from $14,000 to $20,000 in the fall of 2020, Chipper began to let users buy and sell bitcoin and ether, establishing a second lucrative line of business: trading fees. It reached a $2.2 billion valuation in late 2021, with investment from firms including Sam Bankman-Fried’s FTX, Ribbit Capital and Bezos Expeditions. Transactions grew from $200 million in the first quarter of 2021 to $1.6 billion 12 months later.



All that growth comes with added high-stakes challenges. One is liquidity: Chipper needs to make sure it has enough funds in each country to support instant transfers. When it doesn’t, transaction times can slow to a full day or longer. Money can solve that problem. A bigger worry is competition. Senegal-based startup Wave offers similar services (albeit in different countries so far) and notched a&nbsp;<a href="https://techcrunch.com/2021/09/06/sequoia-heritage-stripe-and-others-invest-200m-in-african-fintech-wave-at-1-7b-valuation/" target="_blank" rel="noreferrer noopener">$1.7 billion</a>&nbsp;valuation last year. Other remittance companies such as Remitly and Wise don’t yet let people send money from one African country to another, but there’s nothing stopping them from entering the market.



For now, Serunjogi is focused on maintaining Chipper’s steep growth, moving to profitability—and helping Africans while doing so. Customers benefit, he says, when they can move money easily and have new ways to invest and build wealth. “I’m a deep believer in the role of entrepreneurship and capitalism in improving the lives of people who live in developing countries.”



By Jeff Kauflin, Forbes Staff

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How Two Africans Overcame Bias To Build A Startup Worth Billions

From Africa to America, entrepreneur, architect and urban planner Mokena Makeka speaks to his journey from a Maseru childhood to working as a globally recognized scholar in urban planning and advisor trying to bring innovation to climate justice initiatives around the world.



Growing up between the rolling hills of Lesotho and the skyscrapers of New York can be a jarring experience, but also an insightful one. As the son of the Kingdom of Lesotho’s envoy to the United States of America, Mokena Makeka found himself living between two very diverse worlds, and has brought his varied education and experiences to bear to drive a novel sphere; that of sustainable development and impacting communities as a management consultant.



“One challenge is to reconcile your domestic identity versus your international identity,” said Makeka to FORBES AFRICA, “but the other is sheer contrast between somewhere like Lesotho and New York, and I think that produces tensions; why are there these inequalities, are they structural or are they systematic?”



Indeed, understanding both the systematic and the personal reflects in Makeka’s interests. Originally enrolling at the University of Cape Town in engineering, he found himself dissatisfied until he stumbled upon architecture; “I love mathematics, I love physics… but I also love art – this is a place where I was able to use both sides of my mind.”



Merging understandings between the personal and the structural is what gave Makeka the ability to earn much success as an architect and business, becoming a Desmond Tutu Fellow and Young Global Leader at the World Economic Forum, but also exposed him to many different kinds of people, experiences and spaces – and how these interact.



“There’s a lot of cognitive dissonance [regarding architecture],” says Makeka, using the spatial and geographical legacy of apartheid South Africa, and the recent extreme flooding in Durban as an example.



“After the floods, there were calls for professionals to come in and assist in reconstruction, quantity surveyors, engineers – which is great – but the one discipline that understands space, architects, was not invited.”



The obstacles in making effective change in spaces that are not necessarily responsive is what led Makeka to his current role as a management consultant. “I don’t think it’s my duty to convert the marketplace… I need to go where I can be effective. That’s just the truth,” he says wryly.



When one thinks management consultancies, one thinks of the big advisory firms, many of which are working with large businesses and institutions in an orthodox and established manner, which doesn’t seem to fit the personality and values that Makeka demonstrates. When questioned on how this fits in with his work at Dalberg Advisors, he smiles; “At Dalberg, I found people thinking the same way about community impact, the importance of cities, job creation and youth development… people who understand the value of designing an environment.”



And indeed, constant change and flexibility is something that he advocates for very strongly, stating that everyone should have several lives within their lifetime. “I’m quite disruptive… but I think productively disruptive,” he contemplates – and has followed through, pushing change in the architecture space by founding Cape Town’s School of Explorative Architecture, which took in its first group of 22 students in March of this year.



“I’ve always been keen on doing a few things,” says Makeka. “One is decolonizing education, which is an important project even if it does get tied up in other narratives.”



The future will keep bringing change, and surely a new life and path for Makeka – which is a hope he has for others as well, particularly African youth. “Don’t settle on who you are too quickly… make mistakes and maintain your curiosity – it’s only a failure if you don’t learn from it,” he says firmly. “But otherwise, pivot. Keep growing.”

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The Disruptive Lesotho Architect Pushing Change

FORBES AFRICA was at Expo 2020 Dubai to witness the tech-filled finale of the multi-billion-dollar, 182-day global event that also brought all of Africa.



The party was on for six months.



And on a balmy night, under a gold dome in a grand spectacle of sound and light that saw hundreds of performers and several thousand diverse and starry-eyed visitors, the curtain came down on the Expo 2020 Dubai that brought through its gates an estimated staggering 23 million visitors.



The closing ceremony of the world gala in the UAE emirate last night (March 31), had thousands of visitors streaming in well into the wee hours for the live shows, fireworks and pyrotechnics.



Tech reigned.



Even as Grammy award-winning singer and headline crowd-pleaser Norah Jones said it’s her first trip to Dubai and dazzled in a grey sequinned dress at the piano singing the soulful Come Away With Me, and as thousands thronged every inch of space on the walkways – dodging baby strollers and e-scooters – to hear global pop sensation Christina Aguilera, the true star of the show was the Al Wasl gold dome, the all-rounder of the mega event.



The intricate lattice dome’s eye-popping technical specs? At 67.5 meters tall and comprising 13.6 kilometers of steel, it weighs 2,544 tonnes – “as much as 25 blue whales”. And under it, a sea of humanity gazing at an immersive 360-degree projection system with giant fabric screens.



At the closing event, the baton was handed over to the Japanese city of Osaka, where the next expo will be held in 2025.



The UAE, which celebrated its 50th year during the expo and changed its weekend to Saturday and Sunday in keeping with the West, is home to multiple nationalities. The expo, delayed by the coronavirus pandemic, is being seen as “the start of a new beginning”.



Africa was well-represented too. The colorful African stalls in the world souq areas were quite the magnet for crowds, with hand-woven African baskets and print sandals selling at Dhs100 ($27) a piece.



The African Union pavilion located within the Opportunity District at the expo site spoke to the Agenda 2063 aspirations of the continent and strengthening trade links between the Middle East and Africa.&nbsp;&nbsp;



“It’s been a great experience,” says Coumba Dioukhane, a spokesperson at the Côte d&#8217;Ivoire pavilion, even as crowds queue up around us to get their expo passports stamped by the West African country.



“We were able to showcase the Ivory Coast from an economic, social and cultural point of view; this was an opportunity to show to the whole world where we are, and the investment opportunities we have.”



Similar sentiments at the Sierra Leone pavilion.



The salesman at the store inside points to the python skin for sale and a crocodile skin handbag selling for Dhs1,500 ($408). “But you know we also have gold and diamonds,” he says with a glint in his eye. “Our country was hidden but not anymore. The last six months here in Dubai have been incredible.”



South African President Cyril Ramaphosa had also been at Expo 2020 Dubai, at his country’s pavilion three days before the finale, calling it “a seminal event… as we strive to recover and rebuild in the wake of the pandemic”.



Some enduring connections for Africa in this glistening city in the desert.

Closing Ceremony Held For Expo 2020 Dubai

World Fair Ends With Festivities, Pyrotechnics And High Tech

Hand holding bitcoin

Forbes Blockchain 50 2022

A Guide To All The Outrageous Mansions And Estates Owned By Sanctioned Russian Billionaires

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The Forbes Billionaires List: Africa’s Richest People 2022

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The Highest-Paid Entertainers 2022

Macy’s, Bloomingdale’s and a dozen other large retailers are quietly using controversial facial-recognition technology to fight a rise in smash-and-grab robberies and other coordinated attacks.



It’s part of a larger push to turn retailers’ existing security cameras — those ubiquitous black gadgets that produce thousands of hours of mostly useless footage — into a more sophisticated artificial-intelligence surveillance system, capable of automatically identifying people, license plates and other information that can be used to alert store employees of unfolding threats and ultimately prosecute offenders.



“There’s a big play to use AI right now,” said Read Hayes, director of the Loss Prevention Research Council. “Retailers have got cameras all over the place anyways.”



The technology has new appeal at a time when theft and violence is on the rise, particularly from organized crime groups that steal millions of dollars in merchandise and then sell the products online. Organized retail crime has risen by 60% since 2015, according to the National Retail Federation, with nearly 70% of retailers&nbsp;<a href="https://cdn.nrf.com/sites/default/files/2021-08/2021%20National%20Retail%20Security%20Survey%20updated.pdf" target="_blank" rel="noreferrer noopener">reporting an increase</a>&nbsp;in 2021. As much as $69 billion worth of products are stolen from the nation’s retailers each year, or 1.5% of sales, according to estimates from the Retail Industry Leaders Association and the Buy Safe America Coalition. A record&nbsp;<a href="https://www.retaildive.com/press-release/20210118-retail-fatalities-violent-incidents-up-40-in-the-us-in-2020-according/" target="_blank" rel="noreferrer noopener">523 people were killed</a>&nbsp;during robberies and other violent retail incidents in the U.S. in 2020, including 256 customers and 139 employees.



This month, the federal government&nbsp;<a href="https://www.justice.gov/usao-ndok/pr/members-retail-theft-organization-face-federal-and-state-charges" target="_blank" rel="noreferrer noopener">charged</a>&nbsp;29 people with stealing $10 million in over-the-counter medicine and other items from Walmart, Costco, CVS, GNC&nbsp;and others, then reselling the products on sites like Amazon and eBay.



“What retailers are really trying to do is give police more evidence of who is doing this,” said Adrian Beck, a professor at the University of Leicester whose research focuses on ways to combat retail loss.



Facial-recognition technology is controversial because research has shown it’s often inaccurate when identifying people of color and women. The worst technology has an error rate of up to 35% when scanning darker-skinned women, but less than 1% with lighter-skinned men, according to one&nbsp;<a href="http://proceedings.mlr.press/v81/buolamwini18a/buolamwini18a.pdf" target="_blank" rel="noreferrer noopener">research report</a>. The reason? Early versions of the algorithms were trained using images of celebrities that skewed white and male.



Companies have been working to address the racial bias, and between 2014 and 2018, facial-recognition software got 20 times better&nbsp;at searching a database to find a matching photograph, according to the National Institute of Standards and Technology. However, as of 2019, the government found that some&nbsp;<a href="https://www.washingtonpost.com/technology/2019/12/19/federal-study-confirms-racial-bias-many-facial-recognition-systems-casts-doubt-their-expanding-use/" target="_blank" rel="noreferrer noopener">software still misidentified</a>&nbsp;African-American and Asian people 10 to 100 times more often than white men.



“People have been wrongly arrested because of this technology,” said Jay Stanley, a senior policy analyst for the speech, privacy and technology project at the American Civil Liberties Union. “It’s really not ready for prime time.”



There’s been a push to curb the use of facial recognition by law enforcement, with cities like San Francisco, Minneapolis and Boston barring police officers from using it. Companies like Amazon and Microsoft have stopped selling the tech to police.



However, facial-recognition companies actively market their technology to retailers, who use it to help gather evidence on repeat offenders before ultimately sharing it with local law enforcement.



“There’s been a shift to where the retailer is doing some of this work themselves,” said Tony Sheppard, director of loss prevention solutions at ThinkLP. Law enforcement resources are sometimes thin, he added.



FaceFirst, which said it works with one-quarter of the largest retailers in North America, compiles time-stamped incidents and a calculation of past losses packaged for law enforcement. “When you send this to police, it’s a really strong storyboard,” FaceFirst president Dara Riordan said at a recent industry conference.



Retailers must create their own watchlists, a manual process that involves an employee identifying a person on video footage after an incident and asking the software to alert them the next time the same person walks into one of their locations. It won’t help the first time someone steals, but it can catch repeat offenders.



“Demand for our product is exploding,” said Dan Merkle, CEO of FaceFirst, which now runs more than 12 trillion face comparisons a day for its customers, up from 100 million in 2017. It claims its technology has a 99.7% accuracy rate, with no difference by gender or race, and can reduce theft from non-employees by 34% and in-store violence by 91%.



It’s helped one retailer catch “The Philly Fanatic,” a thief with a reputation for donning Philadelphia Phillies gear, not to be confused with the baseball team’s mascot of the same name. He’d been hitting the same retailer every one to two days with different accomplices, surreptitiously filling a cabinet with $2,000 or so in goods, closing it with double-sided tape and purchasing the cabinet like normal. The goods were then turned over to a “fence,” in charge of reselling the goods. The software helped identify the suspect and send a real-time alert to the retailer, who then apprehended him and turned him over to police, says FaceFirst.



U.K.-based Facewatch said business has doubled during the pandemic, with particularly strong demand from convenience stores. Its biggest deployment is at a retailer with over 100 locations.



Retail is also a growing customer segment for New York-based Oosto, according to chief marketing officer Dean Nicholls. Both regional and national retail chains use its technology, and some of them have deployed it at hundreds of stores. The 150-person company has raised $350 million in funding.



The technology suffered a setback at the beginning of the pandemic, when everyone suddenly began wearing masks. Accuracy rates have been improving as companies train their algorithms on masked faces, but their success rates still vary widely, ranging from 60% to 99%, according to a report from the National Institute of Standards and Technology published this month. Facewatch says it’s now operating at about a 90% accuracy rate and has a human employee check each image before sending an alert to a retailer.



“In 2020, it was debilitating to everybody,” said Merkle. “Now we can function at very high accuracies even with a mask on.”



Retailers are also trying to figure out when to communicate to employees that an offender has walked in the store and how to instruct them to act without putting them in danger. “What do you say to the poor checkout employee on minimum wage?” said Beck.



Few stores want to admit they’re involved with facial recognition, fearful of backlash from shoppers. Rite Aid used the technology for nearly a decade at hundreds of stores, but stopped after an&nbsp;<a href="https://www.reuters.com/investigates/special-report/usa-riteaid-software/" target="_blank" rel="noreferrer noopener">investigation from&nbsp;Reuters</a>&nbsp;pointed out that it used the software in largely low-income, non-white neighborhoods. Others, like Target and Home Depot, have tested facial recognition in the past, but now say they don’t use it.



Retailers are also using other types of video technology. For instance, virtual security guards have become increasingly popular during the pandemic. Guards are stationed remotely and can respond to various alerts — like motion detected by a security camera in the parking lot at 1 a.m. — by speaking directly to the suspected intruder and alerting law enforcement. It’s easier than hiring in-person guards during the current labor shortage and certainly cheaper, running 8% to 12% of the cost, said Sean Foley, an executive at Interface, which provides virtual guards to Zale’s, Dollar General, Big Lots and Gamestop.



Body cameras, like the ones worn by police offers, are also being adopted by retailers. Typically outfitted on security guards, two-thirds of the retailers surveyed by the ECR Retail Loss Group were using the cameras in some capacity and reported a 45% decrease in the number of violent and verbal abuse incidents. They can help cover blind spots left by security cameras, said Scott Thomas, national director of sales for signature brands at Genetec, which sells security system software.



Security cameras are also increasingly capable of identifying objects, like license plates, as well as behavior. Oosto is developing technology that could someday identify weapons, like a gun, or pick up on unusual motion, like multiple people running towards a store, and quickly send an alert to the store to put employees on notice.



“It’s like a radiologist who tells you that a tumor could be cancerous,” said Hayes of the Loss Prevention Research Council. “AI doesn’t do anything but give you a heads up.”



<a href="https://www.forbes.com/sites/laurendebter/"></a>By Lauren Debter, Forbes Staff

Hacker with computers in dark room. Cyber crime

Retailers Quietly Deploying Controversial Technology To Combat Crime Spree

Tatjana Schoenmaker, South Africa’s star swimmer at the Tokyo Olympics who won record-breaking gold in the 200m breaststroke, is constantly challenging herself for the next milestone, she says in an exclusive interview with FORBES AFRICA.



By Nick Said



TATJANA Schoenmaker dreamed of a career in netball and was at first resistant to professional swimming, but after winning Olympic Gold in the 200m breaststroke in a world record time, has proven the old adage that you should always listen to your parents.



Schoenmaker was one of Africa’s stars at the Tokyo Olympics last year as she swept to gold in a record time of 2:18.95, having also claimed silver in the 100m breaststroke as she came within a milli-second of a remarkable double.



It has cemented the 24-year-old’s place among South Africa’s swimming greats, but if her teenage self had her own way, Schoenmaker would not have been in Tokyo to make her mark in history.



“I did many other sports in primary school. I liked hockey, netball and athletics, so at that age I think the push for swimming came from my parents’ side. They saw I had talent,” she tells FORBES AFRICA.



“I was actually against it in the beginning, I was never for it. But when I moved to Tuks Sport High School, and more of my time went into swimming, I started improving. That’s when I started to realize that I’m good at it.



“It was certainly not a passion for me, definitely not. I loved netball and my mind was so set on the fact I wanted to play that sport and I didn’t like swimming.



“But as a 14-year-old, you don’t really know what is best for you. That is why the support of my parents was vital. They believed I had talent and Rocco [coach Rocco Meiring] also believed I could do well.



“I had to trust their judgement, even though I argued against it a lot. I thought I knew everything! So that support from my family to push me&#8230; they knew once I realized [my talent], it would go well.”



Realizing that talent took many, many hours in the pool, dedication and, in the end, an iron will to succeed. Many others have had similar talent, but not the drive that Schoenmaker has shown once she decided to make a go of swimming.



“I am so grateful to them for pushing me out of my comfort zone and what I thought was best for myself,” she says.



“It is hard, the amount of hours makes it very difficult. A lot of young swimmers show amazing potential early on but then fade because the work you need to put in is grueling.



“I am very passionate now about encouraging those young swimmers and telling them they have to push through, because it gets so tough.”



She admits she was fortunate to attend a school where sport is heavily blended with academics to help athletes reach their potential.



“We were able to start school later in the morning to accommodate our swimming. The school would work out how we could get our marks with the time that we had in class. I was very lucky to be part that.



“I felt like I could strike the balance and manage both, it wasn’t that I felt I was under pressure with my schoolwork.”



As for her lightbulb moment when she realized she could be an Olympian, it shows the importance of role models in sport in terms of allowing children to dream.



“It was in 2012, when I joined the school. That was the year of the London Olympics and I remember watching it in the hostel.



“Chad [Le Clos] beating Michael Phelps was incredible. One, he was a South African, and two, I was doing the same amount of training then as a professional like Chad at the school.



“I went from three times a week to 10 or 11 sessions a week, so I thought, ‘my life has become swimming, so I can do this also’.”



Schoenmaker says she loves routine and even today trains in a similar fashion to how she did back then. “My training always stays consistent, the type of training changes a little bit, but I like consistency and my programs are basically a lot of the same things.



“It is about eight sessions of swimming and then two or three sessions of gym [a week]. We have double-swim on a Monday, Wednesday and Friday, and single swim with gym on a Tuesday and a Thursday, and then a single swim on a Saturday. Sunday is completely off.” She admits too, that like many other athletes, the extra year of training afforded by the postponement of the Tokyo Games due to the Covid-19 pandemic actually helped her medal chances.



“We had six months to go ahead of the Games in 2020. It was the January [2020], before the Covid-19 lockdowns started. I was excited, but ‘scared’ nervous. I thought to myself, ‘if only I had one more year to just really get prepared’.



“And then of course, it happened when the Games were postponed. So the second time round when it came to six months to go [in January 2021], now it was genuine excitement. It worked in my favor, I got that extra year.



“We lost a lot of training due to Covid-19, but because there were so few competitions after the lockdowns, we were able to put in some really intense training and catch up those weeks. It worked out perfectly for me.”



Many athletes speak of a post-Games depression, especially those that achieve their goals of winning gold. After years, and sometimes decades, building up to that moment, they can be left with an empty feeling of ‘what now?’.



That is not a problem for Schoenmaker.



“I have watched the movie with Michael Phelps about post-Games depression [The Weight of Gold]. It is the highest achievement you could ever get – a gold medal and a world record.



“But for me, it is not ‘what now?’. It is ‘when next?’. I want to race again and I want to try and improve myself. There is so much space to grow.



“Whether I swim personal bests, or whether I grow personally or spiritually&#8230; I have changed so much when I look back at who I was three years ago at my first major competition. Winning at the Commonwealth Games [in 2018] – the person I was then and who I am now is totally different.



“It is amazing for me that it all still feels like a dream, it doesn’t seem real, and I am so excited to challenge myself in the next galas. What can I do next to better myself in any way, not just my swimming but as a person?”



As for what is next, 2022 will be a big year for the South African with both the Commonwealth Games in Birmingham, England, and the World Championships in Fukuoka, which will be a return to Japan.



“I have the short-course World Championships [in Abu Dhabi] at the end of this year. That is a nice challenge because you have a lot more turns and my turns are probably my weakest part.



“Then this year we have the Commonwealth Games and World Championships, we never usually have those two in the same season. But I am very excited for both,” she says.

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