LONDON — Kristo Käärmann, the billionaire CEO of money transfer firm Wise, was slapped with a £350,000 ($454 million) fine by financial regulators in the U.K for failing to report an issue with his tax filings.
Käärmann, who co-founded Wise in 2011 with fellow entrepreneur Taavet Hinrikus, was on Monday ordered by the Financial Conduct Authority (FCA) to pay the sizable penalty due to a breach of the watchdog’s senior manager conduct rule.
The FCA said that Käärmann failed to notify the regulator about him not paying a capital gains tax liability when he cashed in on shares worth £10 million in 2017.
The watchdog found him in breach of its Senior Management Conduct Rule 4, which states: “You must disclose appropriately any information of which the FCA would reasonably expect notice.”
Käärmann’s name was added to HMRC’s public tax defaulters list. His tax liability for that year was £720,495, according to HMRC.
‘High standards’ expected
The FCA said Monday that, between February 2021 and September 2021, the tax issues were relevant to its assessment of Käärmann’s fitness and propriety as a senior director of a financial services firm.
Käärmann failed to consider the significance of the issues and notify the FCA despite being aware of them for over seven months, the regulator added.
“We, and the public, expect high standards from leaders of financial firms, including being frank and open,” Therese Chambers, joint executive director of enforcement and oversight, said in a statement Monday.
“It should have been obvious to Mr Käärmann that he needed to tell us about these issues which were highly relevant to our assessment of his fitness and propriety.”
Käärmann said in a statement Monday that he remains “focused on delivering the mission for Wise and achieving our long-term vision.” “After several years and full cooperation with the FCA, we have brought this process to a close,” he said.
“We continue to build a product and a company that will serve our customers and owners for the decades to come,” Käärmann added.
The chair of Wise, David Wells, said that the company’s board of directors “continues to take Wise’s regulatory obligations very seriously.”
Wise’s board found that Käärmann was “fit and proper” to continue in his role at the firm after an internal investigation in 2021.
As a result of that review, Käärmann was required by the board to take “remedial actions” to ensure his personal tax affairs were appropriately managed.
Less severe than feared
The value of the FCA’s fine is substantially lower than the potential maximum fine he could have faced.
Käärmann could have been fined as much as £500,000 for his tax failings, but qualified for a 30% discount because he agreed to resolve the issues.
News of the fine comes after Wise earlier this month reported a 17% increase in “underlying income,” which consists of cross-border revenue, card and other revenue, and interest income.
Wise reiterated its target of achieving an underlying profit before tax margin of 13% to 16% over the medium term thanks to investments in pricing, and added that meant it wouldn’t have to make “further material investments in reduced pricing” in the second half of the year.
In a note Monday, analysts at British investment bank Peel Hunt boosted their expectations for Wise’s full-year profit before tax by 15%. They have a £1,000 price target and a “buy” rating on the stock.
“While Wise made no changes to the guidance set in June 2024, we expect a significant near-term beat,” Peel Hunt analysts Gautam Pillai and Barun Singh wrote in the note.
Käärmann and Hinrikus, both Estonian tech entrepreneurs who immigrated to the U.K., took Wise from a scrappy startup to a payments disruptor now worth £7.4 billion.
They created Wise to offer a low-cost alternative to banks charging hidden fees for moving money across borders.
UnitedHealth Group saw some of its insiders step in and purchase declining shares this week.
Kristen Gil, a director at the firm, bought 3,700 shares worth roughly $1 million on Thursday.
Shares of UnitedHealth plunged nearly 11% to $274.35 on Thursday following a report in The Wall Street Journal that the Department of Justice is conducting a criminal investigation into possible Medicare fraud.
UnitedHealth Group , whose stock has been in a tailspin amid a tumultuous period for the health-care giant, saw some of its insiders step in and purchase declining shares this week. Kristen Gil, a director at the firm, bought 3,700 shares worth roughly $1 million on Thursday, while Timothy Patrick Flynn and John Noseworthy, also directors, scooped up about 1,500 and 300 shares , respectively, on Wednesday, according to InsiderScore, which tracks regulatory filings from corporate insiders. Shares of UnitedHealth plunged nearly 11% to $274.35 on Thursday following a report in The Wall Street Journal that the Department of Justice is conducting a criminal investigation into possible Medicare fraud. The stock rebounded 6% Friday, cutting its weekly losses to 23%. UNH 5D mountain UnitedHealth The reported investigation also follows the surprise exit of UnitedHealth Group CEO Andrew Witty, who will be replaced by the company’s former longtime chief executive Stephen Hemsley. Shares of UnitedHealth Group are down roughly 43% this year following a string of setbacks for the company. The company has been grappling with a historic cyberattack, higher-than-expected medical costs and a torrent of public blowback after the murder of UnitedHealthcare CEO Brian Thompson.
U.S. Federal Reserve in Washington, DC, on January 30, 2024.
Mandel Ngan | Afp | Getty Images
The Federal Reserve will look to reduce its headcount by 10% over the next couple of years, including offering deferred resignation to some older employees, central bank chair Jerome Powell said in a memo.
“Experience here and elsewhere shows that it is healthy for any organization to periodically take a fresh look at its staffing and resources. The Fed has done that from time to time as our work, priorities, or external environment have changed,” Powell said in a memo obtained by CNBC.
The central bank chief added that he has instructed leaders throughout the Fed “to find incremental ways to consolidate functions where appropriate, modernize some business practices, and ensure that we are right-sized and able to meet our statutory mission.” One method for shrinking the staff will be to offer a voluntary deferred resignation program to employees of the Federal Reserve Board who would be fully eligible to retire at the end of 2027.
The central bank said in its 2023 annual report that it had just under 24,000 employees. A 10% reduction would bring that number below 22,000.
The memo comes as the Trump administration has pushed for cost cuts across civil service agencies, spearheaded by Elon Musk and the so-called Department of Government Efficiency. Musk has previously called the Fed “absurdly overstaffed.” Powell’s memo did not mention Musk or DOGE as a factor in the decision to shrink headcount.
The planned staff cuts were first reported by Bloomberg News.
Check out the companies making headlines in midday trading. Applied Materials — Shares of the semiconductor manufacturer dropped 6% after Applied Materials posted disappointing fiscal second-quarter revenue. The company’s revenue of $7.10 billion was below the LSEG consensus of $7.13 billion. Semiconductor revenue of $5.26 billion also disappointed the $5.31 billion analysts were looking for. Take-Two Interactive Software — The stock slid 1.8% after the video game company gave weaker-than-anticipated guidance for full-year bookings, expecting the figure to come between $5.9 billion and $6 billion. That missed the $7.82 billion StreetAccount consensus. Take-Two also projected bookings of between $1.25 billion and $1.30 billion for the current quarter, while analysts had penciled in $1.28 billion. Vistra — Shares of the power producer gained 3% after the company purchased seven natural gas facilities from Lotus Infrastructure Partners for $1.9 billion. The gas plants are located in the PJM market, New England, New York and California. Constellation Brands — Shares of the Corona and Modelo importer climbed 1.4% after Berkshire Hathaway disclosed doubling its stake in the company, putting its position at around $2.2 billion in value. Galaxy Digital — The Mike Novogratz-led crypto firm began trading at the Nasdaq on Friday, opening at $23.50 per share in a direct listing. Galaxy Digital has traded in Canada since 2020 . Cava — The eatery chain’s stock dropped more than 2% after the company reiterated its full-year guidance for same restaurant sales, implying a slowdown from first-quarter results. Cava said it achieved 10.8% same store sales growth. However, it maintained a full-year projection of 6% to 8% improvement in that category. Cava’s earnings per share of 22 cents for the period was ahead of projections for 14 cents per share, according to LSEG. Fiserv — The financial services provider jumped more than 4% as the stock recovered some of its steep losses for the week. Fiserv is down more than 9% this week and is one of the most oversold names on Wall Street, with a relative strength index below 30. Coinbase — The crypto exchange jumped more than 9%, recovering losses from the previous session. Some Wall Street analysts called the sell-off overdone and a buying opportunity . On Thursday, the company confirmed the Securities and Exchange Commission has been investigating whether it has misstated its user numbers , sending the stock down 7.2%. Novo Nordisk — Shares stumbled 3% after the pharmaceutical company announced that CEO Lars Fruergaard Jørgensen would be stepping down from his position , citing recent market challenges. Jørgensen, who was in the position for the last eight years, will remain “for a period to support a smooth transition to new leadership” as Novo Nordisk searches for a successor. Doximity — The health care platform issued weak guidance, sending the stock down 11.8%. Doximity expects adjusted EBITDA for the first quarter to come in between $71 million and $72 million. That’s short of the $74 million expected from analysts polled by StreetAccount. Revenue guidance for both the first quarter and full year also missed expectations. — CNBC’s Tanaya Macheel, Lisa Han, Jesse Pound and Michelle Fox contributed reporting.
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