Simpson Thacher: Will Work For Yuan
As the facts have shown, Simpson Thacher has figured out how to profit through its Chinese connections. Look at their clients,partners, and the list of recent accolades received by their Hong Kong and Beijing offices.
But the facts also show very clearly that in the rush to make big bucks off their China business, Simpson Thacher doesn’t give a shit about regular people like us. They are happy to step over us and trample on our interests so their partners can cash in.
Their China IPO business is where it really shows. Almost every Chinese company selling stocks to retail investors in the U.S. is listed in New York through a Variable Interest Entity structure. It’s a big gravy train for those charging fees, and a big scam for those of us footing the bill.
Let’s break down what’s wrong with it:
• When someone purchases a Chinese company’s stock, theydon’t actually own a share of the company. The VIE structure simply funnels our money into a Cayman Islands shell company with the same name.
• Chinese companies like DiDi do this to get around Chinese law, which bans foreigners from being shareholders. But Chinese insiders are in on the game anyway.
• The CCP looks the other way because it wants foreign money, but it keeps every operation on a tight leash. The moment that Xi Jinping and the party bosses get irked, or feel their lieutenants in charge of the company being used in the scheme might get too powerful, they use some Chinese legal lever and cut off the shell group. This leaves the U.S. retail investor with nothing.
But Simpson Thacher collects their fees up front, of course, and their partners get their profits and bonuses. What do they care if we get screwed? Just look at the recent DiDi IPO that crashed and burned. Who would have guessed – another big Chinese company looking to go public, another fat contract for Simpson Thacher representing the underwriters.
• On their IPO, DiDi reported a host of potential risks, including the fact that it “operates in jurisdictions with ‘sometimes conflicting laws and regulations’”.
• Didi initially great, becoming the largest overseas listing of a Chinese company since Alibaba in 2014.
• However, something had already happened behind the scenes to piss off the CCP. In March, DiDi ditched its plans to go public in Hong Kong and instead chose to list on the New York Stock Exchange. This was a major insult to Xi and stripped the CCP of its ability to control the IPO.
• In response, the Cyberspace Administration of China flexed its muscles just days after DiDi’s NYSE IPO, reigning in the company over “concern about Chinese data falling into U.S. hands”. As a result, the stock crumbled, screwing retail investors.
Did Simpson Thacher not know this would happen? Surely since they worked on the IPO, they must have known about the potential issues DiDi was facing. Even within DiDi, there was confusion as to whether they would go public or not. And CCP member Celia Lam runs Simpson Thacher’s China practice – do we really think the Communist Party’s most prized asset within the law firm had no idea what was coming?
It goes without saying that the DiDi debacle is about more than one company’s data. Xi is using the rogue listing as an excuse to crackdown on the VIE structure and force Chinese companies to go public through CCP systems instead. That doesn’t mean that Simpson Thacher will lose any business, only that Celia Lam, the firm’s China expert and resident CCP lackey, will have even greater influence at the firm. In fact, Simpson Thacher will likely be rewarded with even more CCP IPOs because of her.
Simpson Thacher claims to be “committed to the highest standards of social, ethical and environmental responsibility and conduct.” When you help bring Chinese shell companies to market knowing they may face government action that harms their investors, you aren’t just brushing responsibility aside, you’re washing it down the drain. But hey, as long as their pockets are being lined by the CCP, why should Simpson Thacher care about any of us?
Let’s go back to the SEC, where William Hinman was serving as Jay Clayton was preparing to authorize the Enforcement Division to file its blockbuster lawsuit against Ripple. The SEC fought like hell to block Hinman from being deposed about what they did behind the scenes in relation to Bitcoin, Ethereum and XRP in the run-up to that lawsuit.
Hinman was in charge of SEC “no-action” letters on digital tokens. He publicly said that Ethereum is not a security. His agency was asked by Coinbase whether XRP was a security, and it took no action to stop them from listing it on their exchange. Millions of us bought XRP on the secondary market. We never thought it was a security, and many of us had never heard of Ripple.
William Hinman took millions in payments from Simpson Thacher in the run-up to the Ripple lawsuit.
We got screwed.
China brought its Digital Yuan product almost at the same time.
Alipay incorporated the Digital Yuan into its payment system quickly after.
Just a coincidence?