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Federal investigators are probing the conduct and practices of Mithril Capital. US officials, including the FBI, have in recent months questioned some people close to Mithril Capital, a venture capital firm co-founded by Peter Thiel, regarding concerns of financial misconduct at the firm. Mithril’s leader, Ajay Royan, has worked with Thiel for almost two decades and has used that relationship to raise over $1 billion. But in recent years, Royan has frustrated some of his investors by sitting on some of their money rather than investing it in startups, while almost certainly
raking in millions of dollars in fees for himself. This federal probe is just the latest — but most significant — problem for the firm.
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What this means: The drama around Mithril pulls back the curtain on a venture capital industry that is awash in money but governed by relatively few rules. And it raises questions about how often similar situations are unfolding quietly in high finance but don’t manage to draw the scrutiny of the federal government.
[Theodore Schleifer / Recode]
A new law is expected to reclassify many gig economy contract workers as employees. After two hours of debate Tuesday, the California Senate passed AB 5. The bill, which still needs the formality of a state assembly vote and Gov. Gavin Newsom’s signature, both of which are expected, makes it hard for employers to misclassify employees as independent contractors. Potentially, millions of California workers who’ve been kept off payrolls will get basic labor rights for the first time, like overtime pay and unemployment benefits. That means Uber and Lyft drivers, but it
also includes janitors, construction workers, security guards, and hotel housekeepers. The passage of AB 5 also means millions of new workers will now have a right to join labor unions.
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Where California goes, other states often follow: Pro-labor policies often begin in California and are later adopted by other states. For example, in 2004, California became the first state to mandate paid family leave at work. That triggered a wave of other states to do the same, including Rhode Island, Washington, New Jersey, and New York. This dynamic is one reason AB 5 could have such widespread impact.
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But Uber says nothing’s going to change: Uber has said it will continue its business as usual and that it has no plans to change how it classifies its drivers. The company argues that the new legislation doesn’t mandate the company to make a change but only applies a stricter legal test to determine if Uber’s workers are truly independent contractors — a test the company thinks it can pass.
[Alexia Fernández Campbell / Vox]
The FTC is interviewing sellers to find out if Amazon is using its market power to hurt competition. Three sellers on Amazon’s marketplace told Bloomberg that the FTC is conducting 90-minute interviews with small sellers on Amazon to ask how much of their revenue comes from Amazon versus marketplaces like Walmart and eBay, according to Bloomberg.
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The big deal: Antitrust experts told Bloomberg the interviews indicate that the FTC is in the early stages of a sweeping probe to learn how Amazon works. The length of the interviews shows “a serious inquiry rather than investigators merely responding to complaints and going through the motions.”
[Spencer Soper and Ben Brody / Bloomberg]
Cloudflare, the internet domain masking service with former ties to 8chan and the Daily Stormer, violated economic and trade sanctions. The technology company voluntarily disclosed the violations in a regulatory filing ahead of its upcoming IPO, the Wall Street Journal reports. “Cloudflare said in the filing that it determined that its products were used by, or for the benefit of, certain individuals and entities that have been blacklisted by the US,” the Journal reported. Cloudflare admitted the parties using its products “included entities that have been designated by the
US as terrorists and narcotics traffickers.”
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Cloudflare is expected to go public as early as this week: The IPO prospectus was amended last week and the company said it made the self-disclosure in the filing in May to the Treasury’s Office of Foreign Assets Control, which enforces US sanctions.
[Mengqi Sun / The Wall Street Journal]
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