U.S. Commerce Secretary Howard Lutnick has agreed to transfer his stake in Wall Street giant Cantor Fitzgerald to his children and a group of investors, while divesting shares in two subsidiaries BGC Group and Newmark Group, as part of a federal ethics agreement designed to avoid conflicts of interest stemming from his firm’s ties to cryptocurrency company Tether.
Divestment Details: $278.5 Million in Asset Sales
According to Reuters, Lutnick sold his Class A shares in brokerage firm BGC Group for $151.5 million and his holdings in real estate firm Newmark Group for $127 million. These shares were sold back to the two subsidiaries, while Cantor Fitzgerald will acquire Lutnick’s Class B shares in both companies, allowing Cantor to retain controlling influence. Additionally, Lutnick agreed to transfer his direct Cantor Fitzgerald stake to his children and select investors. Alternative investment firm 26North, led by Apollo co-founder Josh Harris and Oak Hill Advisors founder Glenn August, will become a minority shareholder in Cantor Fitzgerald.
Tether Controversy: Crypto Compliance Questions
Lutnick’s connection to Tether, the issuer of the world’s largest stablecoin, has drawn intense scrutiny. Cantor Fitzgerald acts as a custodian for Tether’s reserves, and Senator Elizabeth Warren has described Tether as a “known enabler of criminal activity.” During Lutnick’s confirmation hearings, Warren and other senators raised concerns about his ability to prioritize U.S. interests over his financial ties. Lutnick defended Tether, insisting the company maintains robust Know Your Customer (KYC) practices. Although Lutnick pledged to divest upon confirmation, critics argue that the transfer of shares in companies overseen by the Commerce Department creates inevitable conflicts of interest.
Ethics Agreement: EIGA Compliance and Oversight
The U.S. Office of Government Ethics (OGE) oversees the implementation of the ethics agreement. Under the 1978 Ethics in Government Act (EIGA), federal officials are prohibited from holding financial interests that could compromise their objectivity or independence. Lutnick’s divestiture and stake transfer are structured to comply with this law. The agreement also requires Lutnick to recuse himself from specific matters involving Cantor Fitzgerald or its affiliates for a period of time. Market observers note that as cryptocurrency regulation tightens in the United States, financial ties between senior officials and the crypto industry face increasing scrutiny.