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🦄 Escobar sues fintech unicorn

Good Monday afternoon. Today is Legit's monthiversary, and we come bearing gifts. We just launched an
Legit.
Good Monday afternoon. Today is Legit’s monthiversary, and we come bearing gifts.
We just launched an IG page (@readlegit) bringing you exclusive content you won’t see in the newsletter, like charts documenting fresh insights into legal trends. Scroll for a sneak peek.
In today’s issue:
  • Escobar’s fintech nemesis.
  • Spotify goes podcasting.
  • Amazon’s EU woes.
  • Switzerland busts the CIA.

FINTECH
Escobar’s New Nemesis
Here’s a hot take no one’s talking about: Pablo Escobar’s brother is suing Swedish fintech giant Klarna for €400k in Californian courts.
What Narcos didn’t tell you. Escobar Inc. – the company Pablo used to launder money – is now run by Pablo’s big bro Roberto and a Swedish exec called “El Silencio.” Mysterious.
Last year, the duo released the Escobar Fold 1 - an “unbreakable” gold phone they thought would “destroy” Apple (it didn’t). The Escobar phones were sold via Klarna, Europe’s biggest buy now-pay later platform.
One small problem. Most people who ordered the Escobar Fold never got it. So Klarna quickly cut ties with Escobar Inc., and says it’s withholding €400k to give buyers refunds.
Escobar Inc., on the other hand, claims: (a) they’ve shown Klarna proof the phones were delivered; (b) Klarna’s clinging onto the cash unlawfully.
THE TAKEAWAY
I wouldn’t want to be enemies with an Escobar and a guy called El Silencio.
But Klarna doesn’t mind. A €400k lawsuit is chump change for a fintech unicorn valued at $11 billion. Insiders even say the Escobar escapades are a running joke for Klarna employees.
Even so, Escobar Inc. might get the last laugh. Klarna’s currently prepping for an IPO and El Silencio has vowed to delay the listing by tying the company up in litigation.
Your move, Klarna.
Zoom out. For the sibling of a deceased drug lord, Roberto really loves to sue people:
  • 2016: sued Netflix for the series Narcos.
  • 2020: sued Apple over a security breach on his iPhone.
  • 2020: sued 2 Chainz over his Escobar-themed restaurant.
M&A
Spotify Goes Podcasting
Last Tuesday, Spotify announced it’s buying Megaphone for $235 million.
What’s Megaphone? A pod-tech company that gives advertisers targeted slots on podcasts.
Sounds pretty basic. But it’s not.
Pod ads are the boomers of the advertising industry. They use decades-old RSS technology, with targeting and analytics lacking the precision social media ads have. As a result, advertisers find it hard to measure ad performance and figure out where to invest the $$$.
So Megaphone’s trying to Benjamin Button the industry by giving ad tech a sleek facelift.
And it all ‘ads’ up. Spotify’s keen to roll out its own targeted ad platform - Streaming Ad Insertion (SAI) - to third party podcast publishers. Using Megaphone’s tech to extend SAI’s targeting metrics was a no-brainer.
Other winners? Advertisers, who’ll access Spotify’s huge audience, and podcast makers, who’ll be able to easily monetize their shows.
THE TAKEAWAY
Podspeed. The pod biz is growing exponentially, and Spotify’s on the road to industry domination:
  • In Spotify’s Q3 report, podcast advertising revenue doubled year on year.
  • Spotify has 1.9 million podcasts, including exclusive titles with Michelle Obama, Kim K. and Joe Rogan.
  • Spotify’s made four big pod-cquisitions since 2019.
But other big names want in on the Spot-light. Apple and Sony are both eyeing Wondery, the world’s largest independent podcast studio.
ANTITRUST
Amazon’s European Woes
The European Commission just hit with Amazon with preliminary antitrust charges over the way it uses seller data.
The anti-Robin Hood. The Commission alleges Amazon takes data from small sellers and feeds it into an algorithm that decides which new products Amazon should launch and how (much lower) they should be priced.
This reverse Robin Hood strategy distorts competition and undercuts small businesses, who essentially pay a ‘data tax’ for using Amazon’s marketplace. And if the Commission Sheriff catches Amazon Hood Robin, it faces a fine of up to $28 billion (10% of its global revenue).
Double whammy. The EU simultaneously launched a second investigation into Amazon’s (alleged) preferential treatment of (a) its own retail business; (b) sellers that use Amazon’s logistics and delivery services. 
THE TAKEAWAY
Not even Jeff Bezos can have it all. The EU doesn’t think Amazon should benefit from its dual role as a marketplace operator and a competitor that launches products on the same marketplace.
But it’s not just Amazon. The Commission:
  • Slapped Google with $10 billion in antitrust fines.
  • Is investigating Apple.
  • Might hit Airbnb with tougher regs. 
Sounds like Big Tech is getting Eurozoned.
In other EU news, Google’s CEO has apologized over leaked documents proposing ways to dodge Europe’s strict new tech laws.
INTELLIGENCE
Not So Neutral
Swiss authorities knew the CIA and its German counterpart used a Swiss company as the front for a global espionage operation, a new report by Switzerland’s Parliament reveals.
Back up. Crypto AG was a Swiss company that sold encryption devices to over 120 foreign governments. These governments used the devices to talk about classic govt. stuff: spies, soldiers, diplomatic secrets.
The twist? The devices were rigged. Crypto was secretly owned by the CIA and West German BND, who were able to decrypt and share the innermost communications of foreign leaders with a handful of allies. The operation spanned 50 years and was so extensive the CIA called it the “intelligence coup of the century.”
No wonder why. The CIA and BND were able to influence huge crises - like the hostage standoff in Iran - through their spy ring.
If that wasn’t enough… the new explosive report reveals Swiss authorities knew about the operation and – at times – took advantage of the rigged surveillance tech. So much for Swiss neutrality.
THE TAKEAWAY
Spillin’ secrets. Although Swiss authorities didn’t break any laws by allowing the Crypto operation to continue, the Swiss probe marks the first time a foreign government has publicly ousted a spy ring this big and held it to account.
Zoom out. Two things:
  • The espionage operation calls into question the elaborate web of corporate laws that shielded the CIA’s ownership of Crypto.
  • The rest of the world isn’t too hot about America’s surveillance affair. In August, the EU high court struck down Privacy Shield (the EU/US pact that let businesses transfer personal data across the Atlantic with impunity).
LEGIT ONE LINERS
  • Elon Musk is drafting a constitution for Mars.
  • Ernst & Young faces $1bn lawsuit from NMC Health, the UAE’s largest (most scandalous) healthcare provider.
  • Nissan sues former chairman in Japan for $95 million over financial misconduct claims.
  • US Supreme Court hints it won’t repeal Obamacare.
  • Hong Kong disqualifies pro-democracy lawmakers over China patriotism law.
  • Jones Day faces backlash over involvement in election-related suits.
  • Court upholds Harvard’s race-based admissions.
  • Britney Spears loses bid to remove father from conservatorship.
LEGAL TECH SPOTLIGHT
Meet the 10 venture capital firms pouring money into legal tech.
Follow our IG for more charts.
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