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Morning Coffee: The secret messages at the heart of the Credit Suisse affair. And the rock star with a cache of Deutsche Bank emails

A little-noticed detail in the finale of the story that’s been shaking Swiss banking might have major implications for the careers of nearly everyone working in investment banking today.  The Credit Suisse affair began as an amusing caper, blew up into a corporate furore and seems, unfortunately, to have ended with a human tragedy.  But, unremarked by most commentators, there is one party which comes out of the whole business with their reputation enhanced.  And that’s Threema, the super secretive Swiss messaging app used by COO Pierre-Olivier Bouée and Remo Boccali, the head of security.  Both men have resigned, but according to the report of the law firm commissioned by the CS board, their messages had been irrevocably deleted and could not be used in evidence.

That means that the “sum of all fears” for compliance, regulators and top management is here – a means by which investment banking staff can communicate with one another confidentially and without creating an evidence trail.  This hasn’t been available for decades – effectively since the introduction of the recorded telephone line.  As the LIBOR trials showed, organising anything over Bloomberg chat virtually ensured that it would eventually end up in a courtroom.  Even when you think you’ve deleted your emails or text messages, a competent forensic IT technician can usually recover them.

But it’s not only for dubious behaviour that bankers might want to communicate privately without eavesdropping.  Even simple things like organising a job move can generate a huge amount of complicated logistics and cloak-and-dagger activity, simply to avoid people being seen together by colleagues with big mouths.  How much easier this will all be when we’re able to exchange chats with headhunters over our phones, safe in the knowledge that all the evidence will disappear as quickly and irrevocably as a Snapchat story.

For this reason if no other, we would presume that banks will be doing their best to ban Threema from employees’ private phones over the next few months.  But it’s not as simple as that.  There are literally dozens of the things available, with new ones launching onto the app stores at frequent intervals.  Even WhatsApp, which is by now pretty much embedded into the management communications of many large banks, has end to end encryption and isn’t necessarily going to give a complete record accessible to compliance and management.

Not only that, but finding people is a lot easier than it used to.  Twenty years ago, there would be very few former colleagues or industry contacts who would have your home phone number, your private email address or enough mutual friends to arrange an in-person meetup.  Today, anyone who’s ever been on a “Charity Half Marathon 2017 Afterparty” WhatsApp group with you can send you a confidential message, and all your Facebook and LinkedIn networks are only a couple of steps away from setting up a secure bank-channel.  We might be about to find out what happens to the financial services industry in a world where privacy is re-established.

As well as bankers, of course, journalists do well out of secure communications.  The New York Times’ David Enrich, however, seems to have mainly used email and telephone calls to deal with Val Broeksmit, a prolific source of documents relating to Deutsche Bank over the last few years.

This is partly because Mr Broeksmit doesn’t care about confidentiality – he’s a musician with the band “Bikini Robot Army” who has hacker connections and a few drug problems, and who wants to see his story in a Hollywood movie.  He’s also the son of Bill Broeksmit, Anshu Jain’s former right-hand man.  And he has a large cache of his late father’s documents, covering subjects from Donald Trump to the LIBOR scandal to Deutsche’s troubled relationship with the annual CCAR.  So far, these documents have, it’s fair to say, been the source of more embarrassing media stories than concrete evidence of anything, and their source certainly seems to be an alarming character, but the cache is now in the hands of the FBI, so we’ll see what happens next.

Meanwhile …

“Successful investment-banking franchises are not warm and fuzzy places. But the magnitude of the turnover has been more than I expected”.  A review of David Solomon’s first year at Goldman manages to avoid the dance music cliché, instead revealing that Mr Solomon has binge-watched “Sons of Anarchy” and been arrested for speeding in North Carolina’s Outer Banks. Which in turn suggests that he cannot possibly have gone there during high season when the traffic is atrocious. (Bloomberg)

The latest set of accounts from Revolut show 354% revenue growth and improving margins, but also suggest that the founders and senior employees may have sold some of their shares into the last funding round. (FT Alphaville)

Not all hedge funds founded in college dorm rooms grow up to be as successful as Ken Griffin’s Citadel.  SBB Research is being sued by the SEC over its unconventional approach to structured notes. (Bloomberg)

The “Chinese Pig” row at UBS appears to have finally blown over at UBS and Paul Donovan will be returning from administrative leave. (Financial News)

Citi has promoted Emily Turner to “head of innovation and business development”, running the Innovation Lab with Sandeep Arora and looking for new ideas and investments in the Institutional Clients business unit. (Seeking Alpha)

As rumoured a few months ago, Matt Cyzer’s sales trading team from Deutsche Bank have shown up at Cowen & Co, where Mr Cyzer becomes CEO of Cowen Execution Services Limited (this might be why, unlike the rest of the team, his registration doesn’t seem to have been recorded on the FCA Register). (Globenewswire)

What’s the first thing you need if you’re planning a new stock market?  In the case of “Project Heather”, a Scottish government-backed plan for a new exchange in Edinburgh, you commission the manufacture of a big bell to ring when trading starts later this year. (Financial News)

AUTHORDan Davies Insider Comment

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