Investors around the world are side-eyeing US financial institutions after claims of questionable corporate lending came to light. Two regional banks are accusing investment funds tied to the firm Cantor Fitzgerald of fraudulently taking out multimillion-dollar loans to buy distressed commercial mortgage loans, the banks disclosed this week.

Salt Lake City-based Zions Bancorp is suing to recover more than $60 million, and Phoenix-based Western Alliance Bancorp is trying to get back ~$100 million. The people running the Cantor funds ​​“vehemently deny” the allegations, their lawyer said.

Teed up for panic

Regarding loan quality, Wall Street was already feeling as nervous as a dress code misinterpreter after suspicions of loan fraud arose earlier this week against bankrupt auto supplier First Brands. Then, Zions’s announcement triggered a widespread crisis of confidence in US credit lending. Bloomberg reports that on Thursday:

• Zions and Western Alliance led all US regional banks but one—the aptly named Triumph Bank—into the red.
• In the big leagues, 74 of the largest US banks collectively lost more than $100 billion in market value.

Internationally, Europe’s index of 600 major banks took its biggest spill since Aug. 1, and Asian bank stocks also stumbled yesterday. But in the US, a fresh slate of strong earnings reports from regional banks helped the American sector regain ground during yesterday’s trading session.

Jamie Dimon, lowkey psychic: “When you see one cockroach, there are probably more,” the JPMorgan CEO said on Tuesday regarding the collapse of First Brands and the earlier bankruptcy of auto lender Tricolor…but his words also could have led people to more closely monitor disclosures and to look for holes in the less well-regulated private credit market this week.

Big picture: Bankers, executives, and analysts insist that the tree isn’t rotten—just a few bad apples that seem to be falling at once. Another reassuring sign is that several major banks aren’t ramping up their provisions, aka emergency funds, which suggests that they’re not bracing for a crisis. Still, there is an element of “smile and wave, boys” afoot: “Perception sometimes becomes reality or it mirrors reality,” Wells Fargo analyst Timur Braziler told the Wall Street Journal.—ML

Trump and Zelensky met amid push to end the war. Ukrainian President Volodymyr Zelensky came to the White House yesterday after President Trump said he believes he can convince Russia’s Vladimir Putin to negotiate a peace deal with Ukraine. During the meeting, Trump told journalists that fulfilling Ukraine’s request for Tomahawk missiles capable of reaching targets deep in Russia could lead to escalation, and said that he’d rather end the war without them, a departure from earlier comments suggesting he was ready to supply Ukraine with the weapons. But the president said that discussions on the subject are ongoing, while Zelensky suggested Ukraine could share its drone tech with the US in return. His visit came a day after Trump and Putin discussed the war by phone and agreed to meet in Budapest next week.—SK

John Bolton pleaded not guilty to mishandling classified information. Bolton—who served as a national security advisor during President Trump’s first term before becoming one of his most vocal critics—appeared in court yesterday to plead not guilty to the government’s case accusing him of emailing classified information to his family and keeping sensitive documents in his home. His recent indictment made him the third prominent critic of Trump to be hit with criminal charges in recent weeks. However, unlike the cases against former FBI Director James Comey and NY Attorney General Letitia James, the investigation into Bolton started during the Biden administration. In addition, the charges are more detailed and were filed by career prosecutors rather than one recently appointed by Trump.

Prince Andrew gives up title after Epstein accusations. King Charles III’s younger brother will give up his Duke of York title amid renewed fallout from his relationship with convicted sex offender Jeffrey Epstein. Prince Andrew said he made the decision after a discussion with the king because the accusations against him “distract from the work of” the royal family, though he said he continues to “vigorously deny” them. The decision came days after the publication of an excerpt from Virginia Giuffre’s posthumous memoir that claimed Epstein forced her to have sex with the prince. Prince Andrew had already stopped royal duties and lost his military honors due to his Epstein ties in 2019, and later settled a civil lawsuit from Giuffre for a confidential sum.—AR

Martin Luther King Jr. once warned that technological advances may be outpacing “moral progress.” The civil rights icon has recently been featured in deepfake AI videos of him stealing groceries and playing ding-dong ditch with JFK. So, he may have had a point.

But the arc of the AI slop universe is long, and OpenAI is bending toward justice, announcing this week that users will no longer be allowed to feature MLK in deepfakes after King’s estate objected to several “disrespectful depictions” that have gone viral.

Sora subject

The often offensive videos were created using OpenAI’s popular Sora tool, which allows users to make realistic AI clips via text prompts.

OpenAI maintains there are “strong free speech interests” in allowing creators to use historical figures in their videos, but acknowledges some guardrails are needed. It will start giving their estates the ability to opt out of likenesses being used on the app.

Other families have also had AI-related complaints:

• Zelda Williams, daughter of late comedian Robin Williams, asked fans to stop sending her AI videos of her father.
• George Carlin, whose estate once sued a podcast for using an AI-generated version of the comedian, has also appeared in videos made using Sora that his daughter called “depressing.”

Sora has other issues: After backlash, OpenAI also recently announced plans to give copyright holders more control over how their content appears in Sora.—BC