U.S. regulator stands by decision to block Winklevoss bitcoin ETF

NEW YORK/WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission on Thursday stood by a decision blocking an exchange-traded fund that would have tracked bitcoin, citing concerns about market manipulation.

Brothers Cameron (L) and Tyler Winklevoss talk to each other as they attend a New York State Department of Financial Services (DFS) virtual currency hearing in the Manhattan borough of New York January 28, 2014. REUTERS/Lucas Jackson

The securities regulator found "unpersuasive" arguments that the bitcoin ETF proposed by Cameron and Tyler Winklevoss, the twin brothers who founded crypto exchange Gemini Trust Co LLC, would be sufficiently protected from manipulation, it said in a 92-page analysis bit.ly/2K3GoWG posted on its website.

“Regulated bitcoin-related markets are in the early stages of their development,” the SEC said, saying that it “cannot...conclude that bitcoin markets are uniquely resistant to manipulation.”

But the agency did not completely shut the door to such products coming to market once the bitcoin market has matured, offering some hope for at least five other bitcoin ETF proposals that are still pending before the regulator.

Bitcoin BTC=BTSP turned negative after the SEC"s ruling, and last traded down 2.9 percent.

The virtual currency can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government. A fund holding the currency could attract more investors and push its price higher.

The SEC said there was not enough evidence that efforts to thwart manipulation of the ETF’s price or that of the underlying bitcoin market would be successful.

The SEC had blocked the Winklevoss ETF from coming to market in March 2017, but then faced an appeal from CBOE Holdings Inc’s (CBOE.O) Bats exchange, which applied to list the ETF.

The parties can appeal the SEC’s decision in federal court.

CBOE and Gemini did not immediately respond to requests for comment.

The Winklevoss twins are best known for their feud with Facebook Inc (FB.O) founder Mark Zuckerberg over whether he stole the idea for what became the world’s most popular social networking website from them. The former Olympic rowers ultimately settled their legal dispute, which was dramatized in the 2010 film “The Social Network.”

The SEC’s decision to block the ETF was voted for 3-1 by its sitting commissioners, with Republican commissioner Hester Peirce voting against. In a statement, Peirce said she believed the product met the legal standard.

“More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order,” she said, adding that the ruling “sends a strong signal that innovation is unwelcome in our markets.”

Reporting by Trevor Hunnicutt in New York and Michelle Price in Washington; additional reporting by Anna Irrera in New York; editing by Phil Berlowitz and Leslie Adler

Our Standards:The Thomson Reuters Trust Principles.

Tech

ZTE given temporary reprieve from U.S.; removes more executives

NEW YORK/HONG KONG (Reuters) - China’s embattled ZTE Corp (0763.HK) has received a temporary reprieve from the U.S. government to conduct business needed to maintain existing networks and equipment as it works toward the lifting of a U.S. supplier ban.

FILE PHOTO: The logo of China"s ZTE Corp is seen at the lobby of ZTE Beijing research and development center building in Beijing, China June 13, 2018. REUTERS/Jason Lee/File Photo

ZTE (000063.SZ), which makes smartphones and networking gear, was forced to cease major operations in April after the United States slapped it with a supplier ban, saying it broke an agreement to discipline executives who conspired to evade U.S. sanctions on Iran and North Korea.

The authorization seen by Reuters from the U.S. Commerce Department’s Bureau of Industry and Services runs from July 2 until Aug. 1.

It allows China’s No.2 telecommunications equipment maker to continue operating existing networks and equipment and provide handset customer support for contracts signed before April 15. It also permits limited transfer of funds to or from ZTE.

On Tuesday, ZTE also announced the departure of 1 senior executive in a stock exchange filing, while a source who saw an internal memo told Reuters seven others were removed. As part of its settlement agreement reached in June with U.S. authorities, ZTE had promised to radically overhaul its management.

The company also agreed to pay a $ 1 billion penalty and put $ 400 million in an escrow account as part of the deal to resume business with U.S. suppliers - which provide almost a third of the components used in ZTE’s equipment.

ZTE said in exchange filings late on Tuesday that Xu Weiyan, a shareholders’ representative supervisor in the company’s supervisory committee, has resigned due to personal commitments with immediate effect and no longer holds any position in the company.

An insider source told Reuters a memo was sent out on Tuesday announcing the removal of seven other executives, without providing a reason. They included vice presidents Wang Keyou, Xie Jiepeng and Ma Jie, who were in charge of the legal, finance and supply chain departments, respectively.

Reuters could not immediately contact them for comment. The source declined to be identified due to the sensitivity of the matter.

As part of the deal to lift the supplier ban, ZTE had agreed to remove all members of its leadership at or above the senior vice president level, along with any executives associated with the wrongdoing within 30 days.

It is not immediately clear whether the eight departures on Tuesday were related to ZTE’s compliance violation.

ZTE announced a new board last week in a radical management shakeup. Li Zixue was appointed the new chairman while the previous board led by Chairman Yin Yimin resigned with immediate effect.

Despite the agreement reached almost a month ago, the ban is yet to be lifted amid strong opposition among some U.S. politicians. ZTE has made the $ 1 billion payment but has yet to deposit the $ 400 million in escrow, according to sources.

The uncertainty over the ban amid intensifying U.S.-China trade tensions has hammered ZTE shares, which have cratered around 60 percent since trading resumed last month following a two-month hiatus, wiping out more than $ 11 billion of the company’s market valuation.

ZTE’s Hong Kong shares were down 0.5 percent on Wednesday, while its Shenzhen shares were up more than 4 percent.

Jefferies on Monday upgraded ZTE to a “buy” rating from “underperform”. Its analyst, Edison Lee, said in a note on Tuesday that the temporary reprieve was “a very positive indication that ZTE is on track to a full lifting of the export ban”.

A representative for ZTE declined to comment. The U.S. Department of Commerce did not respond to requests for comment.

Reporting by Karen Freifeld, Anirban Paul and Sijia Jiang; Writing by Tim Ahmann; Editing by Leslie Adler and Marguerita Choy

Tech

Trump to use U.S. security review panel to curb China tech investments

WASHINGTON (Reuters) - U.S. President Donald Trump said on Wednesday he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.

FILE PHOTO: U.S. President Donald Trump speaks during a lunch meeting with Republican members of Congress at the White House in Washington, U.S., June 26, 2018. REUTERS/Kevin Lamarque

The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control investment deals. The legislation expands the scope of transactions reviewed by the interagency panel to address security concerns, Trump said.

The decision marks a victory for Treasury Secretary Steven Mnuchin in a fierce White House debate over the scope of such curbs.

Mnuchin had favored a more measured and global approach to protecting U.S. technology, using authority approved by Congress, while White House trade adviser Peter Navarro, the administration’s harshest China critic, had argued for China-specific restrictions.

“We are not, on a wholesale basis, discriminating against China as part of a negotiation,” Mnuchin said on CNBC on Wednesday.

The investment restrictions are part of the administration’s efforts to pressure Beijing into making major changes to its trade, technology transfer and industrial subsidy policies after U.S. complaints that China has unfairly acquired American intellectual property through joint venture requirements, unfair licensing and strategic acquisitions of U.S. tech firms.

“I have concluded that such (CFIUS) legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” Trump said in a statement that did not specifically name China.

U.S. stocks rose after Trump announced the new approach to U.S. investment restrictions but reversed gains in afternoon trading.

Senior administration officials told reporters on a conference call that sticking with CFIUS, a process companies are familiar with, would ensure strong inward investment into the United States while protecting the “crown jewels” of U.S. intellectual property.

Trump said in his statement that upon final passage of the legislation, known as the Foreign Investment Risk Review Modernization Act, he will direct his administration “to implement it promptly and enforce it rigorously, with a view toward addressing the concerns regarding state-directed investment in critical technologies.”

If Congress fails to pass the legislation quickly, Trump said, he would direct the administration to implement new restrictions under executive authority that could be applied globally.

The decision to stick with CFIUS was a pragmatic move because the new CFIUS legislation “will put a crimp in China’s efforts to move up the value chain in high tech,” said Scott Kennedy, head of China studies at the Center for Strategic and International Studies in Washington.

But it will likely do little to stop the activation of U.S. tariffs on $ 34 billion worth of Chinese goods, scheduled for July 6, or jump-start trade negotiations between the two economic superpowers, Kennedy said.

And the mixed messages from the administration do not help Trump’s negotiating position, he said.

“It shows the Chinese that the Trump administration is still undependable and can be moved back from the most hardline positions,” Kennedy added.

Mnuchin on CNBC downplayed the dissent within the administration, saying that Trump wants to hear differing views on important issues, but the administration’s economic team typically comes together on major recommendations such as the investment restrictions.

Mnuchin said the new CFIUS legislation, passed 400-2 in the House of Representatives on Tuesday, would broaden the types of transactions that could be reviewed by the panel on national security grounds, including minority stakes, joint ventures and property purchases near U.S. military bases.

“This isn’t a question about being weak or strong, this is about protecting technology. We have the right tools under this legislation to protect technology,” Mnuchin said.

COMMERCE EXPORT CURBS

Trump also said that he has directed Commerce Secretary Wilbur Ross to examine U.S. export controls and recommend modifications that may be needed “to defend our national security and technological leadership.”

A Commerce Department spokesman could not be immediately reached for comment on the study.

The CFIUS legislation is headed for negotiations between U.S. House and Senate lawmakers in the coming weeks to craft a final version, with guidance from the Treasury.

A sticking point that could emerge is language in the Senate version that would reinstate the ban on Chinese telecom equipment maker ZTE Corp (000063.SZ) from purchasing U.S. components for a year. The Commerce Department ban had effectively shut the Shenzhen-based company down, angering Beijing.

The House version has less stringent language prohibiting the U.S. Department of Defense from purchasing any ZTE communications gear.

Reporting by David Lawder; Editing by Jeffrey Benkoe and Steve Orlofsky

Tech

Sentiment Speaks: Is It 2016 Again For U.S. Equities, Emerging Markets And Gold?

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Tech

Top U.S. antitrust official uncertain of need for four wireless carriers

WASHINGTON (Reuters) - The head of the U.S. Justice Department’s antitrust division, Makan Delrahim, declined on Friday to support the Obama administration’s firm backing of the need for four U.S. wireless carriers.

FILE PHOTO: A man uses a smartphone in New York City, in this picture taken November 6, 2013. REUTERS/Mike Segar

Asked about T-Mobile’s plan to buy Sprint for $ 26 billion, Delrahim declined to reiterate the view of President Barack Obama’s enforcers, who had said that four wireless carriers were needed.

Instead, Delrahim told reporters, “I don’t think there’s any magical number that I’m smart enough to glean.”

He also said the department would look at the companies’ arguments that the proposed merger was needed for them to build the next generation of wireless, referred to as 5G, but that they had to prove their case.

Bill Baer, a former head of the antitrust division, had told the New York Times in 2014: “It’s going to be hard for someone to make a persuasive case that reducing four firms to three is actually going to improve competition for the benefit of American consumers.”

Reporting by Diane Bartz; Editing by Dan Grebler

Tech

U.S., China nearing deal to remove U.S. sales ban against ZTE: sources

BEIJING (Reuters) - Washington and Beijing are nearing a deal that would remove an existing U.S. order banning American firms from supplying Chinese telecommunications firm ZTE Corp, two people briefed on the talks told Reuters.

FILE PHOTO - Visitors pass in front of the Chinese telecoms equipment group ZTE Corp booth at the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman/File Picture

The people, who declined to be identified because the negotiations were confidential, also said the deal could include China removing tariffs on imported U.S. agricultural products, as well as buying more American farm goods.

ZTE, hit by a seven-year ban in April which effectively crippled its operations, would gain a major reprieve after the world’s two largest economies stepped back from the brink of a fully blown trade war following talks last week.

The company did not immediately reply to requests for comment.

White House advisors have said publicly that the ban against ZTE is being reexamined, but that the firm would still face “harsh” punishment, including enforced changes of management and at board level.

One person told Reuters there was a “handshake deal” on ZTE between U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He during talks in Washington last week that would remove the U.S. Commerce Department’s ban on American companies selling to ZTE in exchange for the purchase of more U.S. agricultural products.

The second person said China may also eliminate tariffs on U.S. agriculture products it assessed in response to U.S. steel duties as a part of the deal, and that ZTE could still be forced to replace its corporate leadership, among other penalties.

Both sources said the deal, while not yet cemented, was likely to be finalised before or during a planned trip by U.S. Commerce Secretary Wilbur Ross to Beijing next week to help finalize a broader trade agreement to avert a trade war.

The company, publicly traded but whose largest shareholder is a Chinese state-owned enterprise, had been hit with penalties for breaking a 2017 agreement after it was caught illegally shipping U.S. goods to Iran and North Korea, in an investigation dating to the Obama administration.

Reporting by Michael Martina; Additional reporting by Se Young Lee and Adam Jourdan; Editing by Muralikumar Anantharaman

Tech

U.S. court revives challenge to Seattle's Uber, Lyft driver union law

(Reuters) - A U.S. appeals court on Friday revived a business group’s challenge to a Seattle law, the first of its kind, that would allow drivers for ride-hailing services such as Uber Technologies Inc UBER.UL and Lyft to unionise.

A driver displays Uber and Lyft ride sharing signs in his car windscreen in Santa Monica, California, U.S., May 23, 2016. This logo has been updated and is no longer in use. REUTERS/Lucy Nicholson

The San Francisco-based 9th U.S. Circuit Court of Appeals said the city did not have the power to regulate payment arrangements between companies like Uber and Lyft and their drivers.

The litigation is unfolding amid a national debate over whether workers in the “gig economy” are independent contractors, who typically cannot form unions, or employees.

The U.S. Chamber of Commerce, which sued over the law last year and counts Uber and Lyft among its members, did not respond to a request for comment. Neither did a spokesman for the Seattle city attorney’s office.

Seattle’s law, passed in 2015, requires the city to select a union as the exclusive bargaining representative of the estimated 9,000 drivers in Seattle who work for Uber, Lyft and other services. The law was put on hold pending the outcome of the Chamber’s lawsuit.

The Chamber argued that by allowing drivers to bargain over their pay, which is based on fares received from passengers, the city would permit them to essentially fix prices in violation of federal antitrust law.

A federal judge in Seattle last year disagreed, saying the state of Washington had specifically authorized its cities to regulate the for-hire transportation industry.

But the 9th Circuit on Friday said state law allows the city to regulate rates that companies charge to passengers, but not the fees that drivers pay to companies like Uber or Lyft in exchange for ride referrals.

The court sent the case back to the judge in Seattle to reconsider the Chamber’s antitrust claim.

The city and supporters of the law, including labor unions, have said that allowing drivers to unionize would improve their working conditions, making ride-sharing services safer for passengers.

Lawyers for the city had told the 9th Circuit that in some cases, drivers were engaging in unsafe behavior such as driving on little or no sleep because they are not paid adequately.

Uber is appealing a state’s judge dismissal of a separate lawsuit the company filed challenging Seattle’s law. A third lawsuit by Uber drivers was dismissed last year.

The case is U.S. Chamber of Commerce v. City of Seattle, 9th U.S. Circuit Court of Appeals, No. 17-35640.

Reporting by Daniel Wiessner in Albany, New York; Editing by Alexia Garamfalvi and Phil Berlowitz

Tech

U.S. 'net neutrality' rules will end on June 11 -FCC

WASHINGTON (Reuters) - The Federal Communications Commission said in a notice on Thursday that landmark 2015 U.S. open-internet rules will cease on June 11, and new rules handing providers power over what content consumers can access will take effect.

FILE PHOTO: The Federal Communications Commission (FCC) logo is seen before the FCC Net Neutrality hearing in Washington, U.S., February 26, 2015. REUTERS/Yuri Gripas/File Photo

The FCC in December repealed the Obama-era “net neutrality” rules, allowing internet providers to block or slow websites as long as they disclose the practice. The FCC said the new rules will take effect on June 11.

A group of states and others have sued to try to block the new rules from taking effect. The revised rules were a win for internet service providers like AT&T Inc (T.N) and Comcast Corp (CMCSA.O) but are opposed by internet firms like Facebook Inc (FB.O) and Alphabet Inc (GOOGL.O).

“The agency failed to listen to the American public and gave short shrift to their deeply held belief that internet openness should remain the law of the land,” FCC Commissioner Jessica Rosenworcel, a Democrat, said Thursday. “The FCC is on the wrong side of history, the wrong side of the law, and the wrong side of the American people.”

The U.S. Senate is set to vote as early as next week on whether to reject the FCC repeal of the net neutrality rules - but that effort faces an uphill battle.

Slideshow (3 Images)

Proponents currently have the backing of 47 Democrats and two independents who caucus with Democrats, as well as Republican Senator Susan Collins. With the prolonged absence of Republican Senator John McCain due to illness, proponents believe they will win on a 50-49 vote.

Senator Ed Markey said it was “likely” the vote will take place in the middle of next week. On Wednesday, senators officially filed a petition to force a net neutrality vote and 10 hours of floor debate under the Congressional Review Act.

Following the FCC announcement, Markey wrote on Twitter, “the Senate must act NOW and pass my resolution to save the internet as we know it.”

The FCC voted 3-2 to reverse Obama-era rules barring service providers from blocking, slowing access to or charging more for certain online content.

Once they take effect, the new FCC rules would give internet service providers sweeping powers to change how consumers access the internet but include new transparency requirements that require them to disclose any changes to consumers.

If the Senate approves the measure, it would not likely pass the Republican-controlled House of Representatives. If the legislation were to pass the House, President Donald Trump would be expected to veto it.

In February, a coalition of 22 state attorneys general refiled legal challenges intended to block the Trump administration’s repeal of net neutrality.

FCC Chairman Ajit Pai has often said he is confident the agency’s order will be upheld.

Democrats have said they believe the issue would be key in November’s midterm congressional elections, especially among younger internet-savvy voters.

Republicans have said the FCC repeal would eliminate heavy-handed government regulations, encourage investment and return the internet to pre-2015 rules.

Reporting by David Shepardson; editing by Jonathan Oatis

Tech

U.S. sends rules on drone regulation to White House for review

WASHINGTON (Reuters) - The U.S. Transportation Department has sent two proposed rules to the White House to regulate the increased use of unmanned aerial vehicles, the agency said on Tuesday as it prepared to unveil the winners of new drone pilot projects.

One of the new rules would allow drones to fly over people while the other would allow for remote identification and tracking of unmanned aircraft in flight. After both are formally proposed, it would take months or even more than a year before they are finalized.

Current rules prohibit nighttime drone flights or operations over people without a waiver from the Federal Aviation Administration. The FAA has no requirements or voluntary standards for electrically broadcasting information to identify an unmanned aircraft.

The FAA has said regulations are necessary to protect the public and the National Airspace System from bad actors or errant hobbyists. Several incidents around major airports have involved drones getting close to aircraft.

The National Transportation Safety Board said in December a September collision between a small civilian drone and a U.S. Army helicopter was caused by the drone operator’s failure to see the helicopter because he was intentionally flying the drone out of visual range.

The helicopter landed safely but a 1-1/2 inch (3.8 cm) dent was found on the leading edge of one of its four main rotor blades and parts of the drone were found lodged in its engine oil cooler fan.

Later on Tuesday, U.S. Transportation Secretary Elaine Chao will unveil the winners for 10 drone projects involving cities, universities, an Indian tribe, counties and states. Reuters reported Tuesday that major technology and aerospace companies including Amazon.com Inc, Apple Inc, Intel Corp, Qualcomm Inc and Airbus SE are vying to take part in the new slate of drone tests.

The wide interest in the U.S. initiative, launched by President Donald Trump last year, underscores the desire of a broad range of companies to have a say in how the fledgling industry is regulated and ultimately win authority to operate drones for purposes ranging from package delivery to crop inspection.

Reporting by David Shepardson; Editing by Richard Chang

Tech

Exclusive: U.S. to reveal winners of drone program that has attracted top companies

(Reuters) - Major technology and aerospace companies including Amazon.com Inc (AMZN.O), Intel Corp (INTC.O), Qualcomm Inc (QCOM.O), Raytheon Co (RTN.N) and Airbus SE (AIR.PA) are vying to take part in a new slate of drone tests the United States is set to announce on Wednesday, people familiar with the matter told Reuters.

FILE PHOTO: Intel CEO Brian Krzanich talks about the new Yuneec Typhoon H drone, which he said was the first consumer drone equipped with Intel"s RealSense sense and avoid technology, during his keynote address at the Consumer Electronics Show in Las Vegas, U.S., January 5, 2016. REUTERS/Rick Wilking/File Photo

The wide interest in the U.S. initiative, launched by President Donald Trump last year, underscores the desire of a broad range of companies to have a say in how the fledgling industry is regulated and ultimately win authority to operate drones for everything from package delivery to crop inspection.

The pilot program will allow a much larger range of tests than are generally permitted by federal aviation regulators, including flying drones at night, over people and beyond an operator’s line of sight.

The U.S. Transportation Department is set to announce 10 winning state, local or tribal governments to host the experiments out of 149 applicants. Secretary Elaine Chao will make the winners public on Wednesday. The governments in turn have partnered with companies who will play a role in the tests.

FILE PHOTO: An Amazon Prime Air Flying Drone is displayed during the "Drones: Is the Sky the Limit?" exhibition at the Intrepid Sea, Air & Space Museum in New York City, U.S., May 9, 2017. REUTERS/Brendan McDermid/File Photo

At least 200 companies applied as partners in the program, a U.S. official said.

Companies including Apple Inc (AAPL.O), Boeing Co (BA.N) and Ford Motor Co (F.N) have also expressed interest in the program, the sources said, though it was unclear whether they all had joined applications and what they would be testing.

Qualcomm confirmed it is on at least three applications, and Intel said it hopes to participate in the program. The other companies did not immediately answer requests for comment.

Changes to U.S. policy that result from the tests are not expected for some time. Package delivery, which can be particularly complex, might not take place until later on during the program.

Earl Lawrence, who directs the U.S. Federal Aviation Administration’s unmanned aircraft systems integration office, told a Senate panel on Tuesday that many of the other projects “could go forward under the FAA’s existing rules, including with waivers where appropriate.”

He said after “the 10 selections for the pilot program are announced, the FAA will be reaching out to other applicants, as well as interested state and local authorities, to provide additional information on how to operationalize their proposed projects.”

The FAA is also working on proposed regulations to ensure the safety of drones and their integration into U.S. airspace.

The initiative is significant for the United States, which has lagged other countries in drone operations for fear of air crashes. That had pushed companies like Amazon to experiment overseas.

In the United Kingdom, the world’s largest online retailer already sends some packages by drone. It completed its first such mission in late 2016, taking 13 minutes from click to delivery.

Reporting by Jeffrey Dastin in San Francisco and David Shepardson in Washington; Additional reporting by Stephen Nellis and Paul Lienert; editing by Chris Sanders and David Gregorio

Tech

U.S. considering restrictions on China's telecoms companies: WSJ

WASHINGTON (Reuters) - The Trump administration is considering executive action to restrict some Chinese companies’ ability to sell telecommunications equipment in the United States, the Wall Street Journal reported on Wednesday.

FILE PHOTO: The Huawei logo is seen during the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman

The move, which if implemented would likely affect Huawei Technologies Co Ltd [HWT.UL] and ZTE Corp, two of the world’s major telecommunications equipment manufacturers, was based on national security concerns, the Journal said, citing several people familiar with the matter.

U.S. lawmakers and the Trump administration have pressured U.S. companies to not sell Huawei or ZTE products, saying they potentially could be used to spy on Americans. Earlier this year they pushed AT&T to drop a deal with Huawei to sell its smartphones in the United States.

The White House did not immediately respond to a Reuters request for comment. Representative of Huawei and ZTE could not be reached immediately for comment, though both have denied allegations that their products are used to spy.

Any executive action would come on the heels of a series of U.S. moves aimed at stopping or reducing access by Huawei and ZTE to the U.S. economy, including recent restrictions on U.S. suppliers of ZTE set by the Commerce Department, amid allegations the companies could be using their technology to spy on Americans. [nL3N1RX1NT]

The U.S. Department of Defense has already stopped selling mobile phones and modems made by the Chinese technology companies Huawei Technologies [HWT.UL] and ZTE Corp in stores on its military bases, citing potential security risks.

As of April 25, the Pentagon ordered that these and related products be removed from its stores worldwide, according to Pentagon spokesman Major Dave Eastburn.

“These devices may pose an unacceptable risk to the department’s personnel, and mission,” Eastburn said.

The Army and Air Force have more than 3,100 stores around the world, and also sell goods online to military personnel. The Navy Exchange has more than 300 stores worldwide, as well as stores aboard more than 100 ships.

Reporting by Tim Ahmann; Writing by Mohammad Zargham; editing by David Alexander and James Dalgleish

Tech

U.S. probing Huawei for possible Iran sanctions violations: sources

NEW YORK/LONDON (Reuters) - Federal prosecutors in New York have been investigating since at least last year whether Chinese tech company Huawei Technologies Co Ltd [HWT.UL] violated U.S. sanctions in relation to Iran, according to sources familiar with situation.

FILE PHOTO: The Huawei logo is seen during the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman/File Photo

The prosecutors have been investigating alleged shipping of U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, two of the sources said on condition of anonymity.

The probe, first reported by the Wall Street Journal on Wednesday, is being run out of the U.S. Attorney’s office in Brooklyn, the sources said. John Marzulli, a spokesman for the prosecutor’s office, would neither confirm nor deny the existence of the investigation.

The Department of Justice in Washington declined to comment.

Huawei, which makes handsets and telecommunications network equipment, said it complies with “all applicable laws and regulations where it operates, including the applicable export control and sanction laws and regulations of the UN, US and EU.”

News of the Justice Department probe follows a series of U.S. actions aimed at stopping or reducing access by Huawei and Chinese smartphone maker ZTE Corp (000063.SZ) to the U.S. economy amid allegations the companies could be using their technology to spy on Americans.

In February, Senator Richard Burr, the Republican chairman of the U.S. Senate Intelligence Committee, cited concerns about the spread of Chinese technologies in the United States, which he called “counterintelligence and information security risks that come prepackaged with the goods and services of certain overseas vendors.”

Republican Senators Marco Rubio and Tom Cotton have introduced legislation that would block the U.S. government from buying or leasing telecommunications equipment from Huawei or ZTE, citing concern the Chinese companies would use their access to spy on U.S. officials.

U.S. authorities last week banned American companies from selling to ZTE (000063.SZ) for seven years, saying the Chinese company had broken a settlement agreement related to Iran sanctions with repeated false statements - a move that threatens to cut off ZTE’s supply chain.

The ZTE ban was the result of its failure to comply with an agreement with the U.S. Commerce Department reached last year after it pleaded guilty in federal court to conspiring to violate U.S. sanctions by illegally shipping U.S. goods and technology to Iran.

In 2016, the Commerce Department made documents public that showed ZTE’s misconduct and also revealed how a second company, identified only as F7, had successfully evaded U.S. export controls.

In a 2016 letter to the Commerce Department, 10 U.S. lawmakers said they believed F7 to be Huawei, citing media reports.

In April 2017, lawmakers sent another letter to Commerce Secretary Wilbur Ross asking for F7 to be publicly identified and fully investigated.

Reporting by Arjun Panchadar in Bengaluru, Karen Freifeld in New York, Eric Auchard in London; Editing by Frances Kerry and Paul Simao

Tech

Facebook will not testify at U.S. House hearing on social media

WASHINGTON (Reuters) - Facebook Inc said Wednesday it has declined an invitation to testify at a U.S. House of Representatives hearing Thursday on filtering practices by social media companies, a company spokesman said.

A man poses with a magnifier in front of a Facebook logo on display in this illustration taken in Sarajevo, Bosnia and Herzegovina, December 16, 2015. REUTERS/Dado Ruvic

The company said that even though it will not appear, it looks “forward to a continuing dialogue with members of the committee about Facebook’s strong commitment to being a platform for all voices and ideas.”

Alphabet Inc and Twitter Inc have also been invited to testify at the House Judiciary Committee hearing, but have not said whether they will appear. Some Republicans have criticized social media companies for censoring some conservative viewpoints, a charge the firms have denied.

Reporting by David Shepardson; editing by Jonathan Oatis

Tech

U.S. biotech companies Alnylam, Dicerna settle trade secrets case

BOSTON (Reuters) - Dicerna Pharmaceuticals Inc on Friday said that it will pay $ 15 million plus stock to Alnylam Pharmaceuticals Inc to resolve a lawsuit claiming it stole trade secrets about gene-silencing technology used to develop drug treatments.

The settlement between the two biotech companies resolves a lawsuit that Alnylam filed against Dicerna in 2015. The accord came ahead of a jury trial that was set to begin on Monday in state court in Woburn, Massachusetts.

Under the agreement, Dicerna will pay Alnylam $ 2 million up-front plus 983,208 shares of its common stock, worth around $ 13.7 million based on the stock’s price at midday on Friday. Dicerna’s stock price was up 38.68 percent.

Cambridge, Massachusetts-based Dicerna said it will also pay Alnylam another $ 13 million over the next four years, the timing of which is dependent on revenue Dicerna receives pursuant to future RNAi technology-based partnerships under its GalXC brand.

“With today’s announcement of a settlement with Alnylam, we are now able to focus the entirety of our resources on the advancement of our key clinical and discovery programs,” Dicerna Chief Executive Douglas Fambrough said in a statement.

Alnylam, also Cambridge-based, did not respond to a request for comment.

Alnylam’s lawsuit accused Dicerna of misappropriating confidential information related to RNAi technology Alnylam acquired when in 2014 when it bought a Merck & Co Inc subsidiary in a deal it valued in court papers at $ 325 million.

(Corrects settlement amount in first paragraph to say $ 15 million)

Reporting by Nate Raymond in Boston; Editing by Tom Brown

Tech

U.S. Supreme Court weighs South Dakota e-commerce sale tax fight

WASHINGTON (Reuters) - The U.S. Supreme Court on Tuesday will consider whether to let states force out-of-state online retailers to collect sales taxes on purchases in a fight potentially worth billions of dollars pitting South Dakota against e-commerce businesses.

FILE PHOTO: The South Dakota state capitol building is seen in Pierre, South Dakota, U.S., February 7, 2018. REUTERS/Lawrence Hurley/File Photo

South Dakota is asking the nine justices to overturn a 1992 Supreme Court precedent that states cannot require retailers to collect state sales taxes unless the businesses have a “physical presence” in the state.

The state, appealing a lower court decision that favored Wayfair Inc, Overstock.com Inc and Newegg Inc, is being supported by President Donald Trump’s administration.

A ruling favoring South Dakota could eventually lead to online customers paying more for many purchases.

Such a ruling could help small brick-and-mortar retailers compete with online rivals while delivering up to $ 18 billion into the coffers of the affected states, according to a 2017 federal report. The justices are due to decide the case by the end of June.

South Dakota depends more than most states on sales taxes because it is one of nine that do not have a state income tax. South Dakota projects its revenue losses because of online sales that do not collect state taxes at around $ 50 million annually, while its opponents in the case estimate it as less than half that figure.

FILE PHOTO: A view of the U.S. Supreme Court building is seen in Washington, DC, U.S., October 13, 2015. REUTERS/Jonathan Ernst/File Photo

The justices will hear the case against a backdrop of Trump’s harsh criticism of Amazon.com Inc, the dominant player in online retail, on the issue of taxes and other matters. Trump has assailed Amazon CEO Jeff Bezos, who owns the Washington Post, a newspaper that the Republican president also has disparaged.

Amazon, which is not involved in the Supreme Court case, collects sales taxes on direct purchases on its site but does not collect taxes for items sold on its platform by third-party venders, amounting to about half of total sales.

South Dakota is supported by industry groups representing major retailers that have brick-and-mortar stores, and therefore already collect state sales taxes. The National Retail Federation, which supports the state, has a membership that includes Walmart Inc and Target Corp, as well as Amazon.

E-commerce companies supporting Wayfair, Overstock and Newegg include two that provide online platforms for individuals to sell online: eBay Inc and Etsy Inc.

The 2016 South Dakota law requires out-of-state online retailers to collect sales tax if they clear $ 100,000 in sales or 200 separate transactions. The state sued a group of online retailers to force them to collect the state sales taxes, with the aim of overturning the 1992 precedent.

Reporting by Lawrence Hurley; Editing by Will Dunham

Tech

Facebook backs U.S. regulation of internet political ads

SAN FRANCISCO/WASHINGTON (Reuters) - Facebook Inc Chief Executive Mark Zuckerberg on Friday endorsed U.S. legislation to regulate political ads across the internet, a concession to lawmakers days before he is scheduled to testify in two U.S. congressional hearings.

FILE PHOTO: Facebook Founder and CEO Mark Zuckerberg speaks on stage during the annual Facebook F8 developers conference in San Jose, California, U.S., April 18, 2017. REUTERS/Stephen Lam/File Photo

Zuckerberg also said Facebook would begin requiring people who want to run ads on the social network addressing political issues to verify their identity and location. That expands an earlier plan to require such verification for ads directly about elections.

“Election interference is a problem that’s bigger than any one platform, and that’s why we support the Honest Ads Act,” Zuckerberg wrote in a Facebook post on Friday.

That legislation was introduced last October to counter concerns about foreign nationals using social media to influence American politics, an issue being looked at as part of an investigation into possible Russian meddling during the 2016 U.S. presidential campaign.

Facebook disclosed in September that Russians under fake names had used the social network to try to influence U.S. voters in the months before and after the 2016 election, writing about inflammatory subjects, setting up events and buying ads.

In February, U.S. Special Counsel Robert Mueller charged 13 Russians and three Russian companies with interfering in the election by sowing discord on social media.

The legislation would expand existing election law covering television and radio outlets to apply to paid internet and digital advertisements on platforms like Facebook, Twitter Inc and Alphabet Inc’s Google.

Facebook had previously stopped short of backing the legislation, saying it wanted to work with lawmakers further and announcing attempts at self-regulation.

Zuckerberg is scheduled to appear on Tuesday before a joint hearing of two U.S. Senate committees, and on Wednesday before a U.S. House committee.

Under the Honest Ads Act, digital platforms with at least 50 million monthly views would need to maintain a public file of all electioneering communications purchased by anyone spending more than $ 500.

Zuckerberg said on Friday that he also wanted to shed more light on “issue ads,” or ads that discuss a political subject but do not directly relate to an election or a candidacy.

Issue ads are frequently run by interest groups, lobbying organizations and wealthy individuals who want to influence legislation or have an indirect impact on an election.

Every advertiser who wants to run an issue ad will need to confirm their identity and location, Zuckerberg wrote.

Reporting by David Ingram in San Francisco and Dustin Volz in Washington; Editing by Bill Rigby

Tech

U.S. tax liabilities for crypto currencies in 2017 seen at $25 billion, to pressure bitcoin: Fundstrat

NEW YORK (Reuters) - Soaring crypto-currency prices last year are estimated to result in U.S. tax liabilities of $ 25 billion, adding further selling pressure to these assets in the short term, according to a research note by Fundstrat Global Advisers on Thursday.

A bitcoin logo is seen at a facility of the Youth and Sports Ministry in Caracas, Venezuela February 23, 2018. REUTERS/Marco Bello

This could mean a massive outflow from crypto currencies to the dollar by April 15, the deadline for filing taxes this year, the firm said.

“We believe selling pressures (in crypto) have been amplified by capital gains tax-related selling this year,” said Thomas Lee, Fundstrat’s co-founder and head of research. Lee was formerly J.P. Morgan’s chief equity strategist from 2007 to 2014.

Still, Fundstrat believes the outlook for bitcoin should improve after the April 15 tax deadline. It reiterated its mid-year target of $ 20,000 and year-end forecast of $ 25,000.

Bitcoin in 2018 has lost more than 50 percent of its value, with other crypto currencies such as ether and ripple also hurt by intense regulatory scrutiny around the world.

Bitcoin last traded down nearly 2 percent at $ 6,673.53 on the Bitstamp platform. In December last year, bitcoin hit a record just shy of $ 20,000.

Virtual currencies led by bitcoin grew $ 590 billion in 2017 in terms of market value, compared with an $ 11 billion increase in 2016, Fundstrat said, estimating that 30 percent of crypto holders are in the United States.

The $ 25-billion tax liability accounts for 20 percent of the expected total tax payments for capital gains of around $ 168 billion in 2017, the research firm said. The projected tax liability is based on taxable gains for crypto of $ 92 billion, it added.

Fundstrat also said crypto exchanges posted record profit in November and December and are expected to have huge tax liabilities, which should add to further selling in crypto-currencies. Many of the exchanges have net income exceeding $ 1 billion in 2017 and keep their working capital in bitcoin and ether, the research firm added.

To meet these tax liabilities, exchanges need to sell bitcoin and ether.

Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette Baum

Tech

U.S. government seeks end to Supreme Court privacy fight with Microsoft

The U.S. government’s Supreme Court battle with Microsoft Corp over whether technology companies can be forced to hand over data stored overseas could be nearing its end, after federal prosecutors asked that the case be dismissed.

FILE PHOTO: The Microsoft logo is shown on the Microsoft Theatre in Los Angeles, California, U.S., June 13, 2017. REUTERS/Mike Blake/File Photo

President Donald Trump on March 22 signed a provision into law making it clear that U.S. judges can issue warrants for such data, while giving companies an avenue to object if the request conflicts with foreign law.

“This case is now moot,” the U.S. Department of Justice said, citing the newly passed legislation, in a 16-page court filing on Friday that requested the dismissal.

The Supreme Court on Feb. 27 heard arguments in the case, which had been one of the most closely watched of the high court’s current term. Some justices urged Congress to pass a law to resolve the matter.

FILE PHOTO: Microsoft President and Chief Legal Officer Brad Smith (R) makes a statement to the news media with his lawyer Josh Rosenkranz outside of the U.S. Supreme Court in Washington, U.S., February 27, 2018. REUTERS/Leah Millis

Microsoft and the Justice Department had been locked in a dispute over how U.S. prosecutors seek access to data held on overseas computer servers owned by American companies. The case involved Microsoft’s challenge to a domestic warrant issued by a U.S. judge for emails stored on a Microsoft server in Dublin relating to a drug-trafficking investigation.

The bipartisan new law, known as the Cloud Act, was supported by Microsoft, other major technology companies and the Trump administration. But civil liberties groups opposed it, saying it lacked sufficient privacy protections.

Microsoft, which has 100 data centers in 40 countries, was the first American company to challenge a domestic search warrant seeking data held outside the United States. The Microsoft customer whose emails were sought told the company he was based in Ireland when he signed up for his account.

A representative for Microsoft did not immediately return requests for comment on the Justice Department’s filing.

Reporting by Lawrence Hurley and Alex Dobuzinskis; Additional reporting by Dustin Volz; Editing by Will Dunham and Jonathan Oatis

Tech

Trump attacks Amazon, again, over U.S. postal rates

(Reuters) - U.S. President Donald Trump launched his second attack in a week on Amazon.com Inc on Saturday, accusing the world’s biggest online retailer of getting unfairly cheap rates from the U.S. Postal Service and not paying enough tax.

FILE PHOTO: The logo of Amazon.com Inc is seen in Sao Paulo, Brazil October 17, 2017. REUTERS/Paulo Whitaker/File Photo

Trump’s comments on Twitter reiterated criticisms he made on Thursday about the company. He may have been prompted by a report from news website Axios saying he was obsessed with Amazon and considering ways to rein in the company’s power, possibly with federal antitrust or competition laws.

Investor concerns about regulatory action sent Amazon shares down 3.3 percent over Wednesday and Thursday, knocking $ 24 billion off the company’s market value.

“While we are on the subject, it is reported that the U.S. Post Office will lose $ 1.50 on average for each package it delivers for Amazon. That amounts to Billions of Dollars,” Trump tweeted on Saturday.

A Citigroup analysis last year showed that if the U.S. Postal Service (USPS) reallocated costs to account for the growing volume of packages it delivers, it would cost $ 1.46 more to deliver each package. Federal regulators, which review contracts made by USPS, have not raised any issues with the terms of its contract with Amazon.

U.S. President Donald Trump arrives at Palm Beach International Airport, Florida, U.S. for the Easter weekend at Mar-a-Lago in Palm Beach March 29, 2018. REUTERS/Yuri Gripas

“If the P.O. ‘increased its parcel rates, Amazon’s shipping costs would rise by $ 2.6 Billion’,” Trump tweeted, although it was not clear what report he was citing. “This Post Office scam must stop. Amazon must pay real costs (and taxes) now!”

A White House spokeswoman said on Thursday the administration has no Amazon-related action at this time.

Trump also accused the Washington Post, owned privately by Amazon Chief Executive and founder Jeff Bezos, of being a “lobbyist” for Amazon.

The newspaper, a frequent target of Trump’s ire, won a Pulitzer Prize last year for its critical investigation of Trump’s donations to charities.

Amazon declined comment. The Washington Post did not immediately reply to a request for comment.

Reporting by Bill Rigby; Editing by Bill Trott

Tech

BMW to double self-driving car testing fleet despite U.S. fatality

MUNICH (Reuters) - BMW will not change its strategy on autonomous vehicle testing despite the death of a pedestrian struck by a self-driving car during tests by ride-hailing firm Uber [UBER.UL], senior executives said on Wednesday.

FILE PHOTO: A logo of the German luxury carmaker BMW is seen during the company"s annual news conference in Munich, Germany, March 21, 2018. REUTERS/Michael Dalder/File Photo

The German carmaker added it would double the size of its autonomous vehicle testing fleet to around 80 this year.

“Our estimation about autonomous driving technology remains unchanged even though this appears to be an extremely regrettable accident,” Klaus Froehlich, BMW’s board member responsible for research and development, said of the fatality. [nL1N1R1168]

“The path to autonomous driving is a long one. I have spoken about a mission to Mars,” he said, adding BMW was conducting its own tests under a high level of security.

Froehlich said BMW’s self-driving cars would undergo a test regime equivalent to 250 million driven kilometers (155 million miles).

Of this, 20 million km will be on real roads, while a giant supercomputer will simulate traffic scenarios in a virtual test regime equivalent to 230 million kms, Froehlich explained.

Self-driving cars will appear sooner if cities dedicate special lanes for autonomous cars in ring-fenced areas.

“In a dedicated space for only autonomous vehicles, it is easier to anticipate what other vehicles and traffic will do,” Froehlich said. “This makes it easier to program vehicle reflexes and may even allow a car to have fewer sensors and less processing power than a vehicle which needs to navigate normal traffic with things like bicycle couriers.”

BMW plans to launch an autonomous vehicle in 2021. Introducing a vehicle earlier than this is not plausible, since chipmakers and software designers have not yet developed a computer capable of processing the sheer volume of data generated by a self-driving car, Froehlich said.

BMW is preparing for a new era of on-demand mobility where customers locate and hail vehicles using smartphones. Ride-hailing and car-sharing could be replaced by fleets of autonomous cars, once self-driving cars are roadworthy, Froehlich said.

Reporting by Edward Taylor; Editing by Mark Potter

Tech