Source: Forbes
On the morning of July 27, Howard Lutnick, the veteran CEO of Cantor Fitzgerald, took the stage at the 2024 Bitcoin Conference in Nashville, Tennessee. Thousands of cryptocurrency enthusiasts gathered, and the scene also brought together many "royalties" of the MAGA camp, including Vivek Ramaswamy, Robert F. Kennedy Jr., and Donald Trump himself.
Lutnick, a burly 63-year-old with thinning hair, made an impassioned 20-minute speech to defend Tether, a cryptocurrency pegged to the US dollar, and announced the launch of a $2 billion financing business to provide leveraged support for Bitcoin investors. But before making these bold statements, he once again told a familiar story.
On the morning of September 11, 2001, he was taking his oldest son to his first day of kindergarten when a plane crashed into the World Trade Center, where Cantor Fitzgerald’s headquarters were located, on floors 101 to 105. Among the 658 employees in the office were his brother Gary and best friend Doug, as well as 28 pairs of brothers and a pair of sisters. Lutnick recalls how close everyone was and talks about his recruiting strategy: “We had an unusual model, we just wanted to work with people we liked.” The tragedy fueled his sense of purpose. Lutnick pledged to give 25% of the company’s profits to the victims’ families over five years, ultimately paying out $180 million.
Twenty-three years later, Lutnick still sees himself as a model of patriotism and resilience. Many others do, too. On Tuesday, Trump announced his nomination of Lutnick as commerce secretary through his social media platform Truth Social. He did not specifically mention Lutnick's business acumen or knowledge of trade policy, but mainly recalled the "911" incident, saying that Lutnick "is an inspiration to the whole world" and that he "epitomizes the spirit of resilience in the face of unimaginable tragedy." His story is true and certainly inspiring. But there is also a dark side to Lutnick, which can be seen by flipping through court documents and talking to people who have had business dealings with him. These people claim that Lutnick and his company have used various means to squeeze money from customers, investors and colleagues for many years. According to a former partner, Lutnick's actions made him "the most hated man on Wall Street." His business empire is worth billions of dollars, including two public companies and an unlisted investment bank, but it is full of self-dealing and decades of poor record keeping, and internal fighting continues to this day. "The whole thing is about screwing people, about squeezing them dry," said one former employee. Cantor Fitzgerald operates as a partnership, but the ultimate decision-making power is undoubtedly in Lutnick's hands. Now worth more than $1.5 billion, he pays himself a salary comparable to that of a king, but it also eats into the profits of his partners. A former partner recalled: "He does whatever he wants." According to a federal court lawsuit filed last year, Lutnick once asked employees to convert 10% to 20% of their salary into partnership shares, which sounded good, but when employees tried to withdraw the money, they encountered setbacks. The agreement allegedly gave Lutnick unilateral discretion to withhold funds from departing employees for violating non-compete clauses, which were very broadly defined. It is estimated that 40% of employees did not get all their money back after leaving. The lawsuit said that this was a ruse to deceive employees and enrich Lutnick. Another former colleague said, “He pays you when he wants to, and when he doesn’t, you don’t get it.” Lutnick’s firm has filed a motion to dismiss the lawsuit.
Through a spokesman, Lutnick declined to be interviewed for this article. But others have spoken out, saying some people may just not be tough enough to handle his tough style or not smart enough to understand the partnership agreement (which one executive estimated was 700 pages). Yet even those who support Lutnick are reluctant to express their views publicly. “People are very afraid of him,” said a former colleague. “I saw it firsthand—I saw the bullying, I saw the aggressive behavior.”
This aggressiveness may be exactly what Trump is looking for in picking a secretary of commerce—plus loyalty.
At the beginning of 2021, when many in the business community were eager to distance themselves from Trump, Lutnick remained on his side. At the time, Trump was setting up a media and technology company with dreams of building a social platform similar to Twitter, but he clearly didn't want to pay too much of his own money. Lutnick seemed like the perfect financier. After more than 40 years in finance, he had extensive experience and was good at taking advantage of various Wall Street trends, including the latest special purpose acquisition companies (SPACs), which inject liquidity into private companies and take them public. Two former contestants on Trump's "Apprentice" joined him to help him build the business. They held a meeting with Lutnick on Zoom, and Forbes obtained the minutes of the meeting. The Trump team wrote on it: "The meeting went well. Howard asked us to abandon other SPACs. He will fly in to meet with the President on March 30th." Trump and Lutnick have known each other for many years and have a lot in common. They both accumulated their initial wealth in New York in the 1980s, one in real estate and the other on Wall Street. Their business approaches were similar, too, as they bounced between money-making schemes and sometimes drew the attention of regulators for alleged fraud, poor record-keeping or money laundering. Both were hardliners with a penchant for lavish living. Lutnick lived in an apartment at Trump Palace, complete with a British butler, before moving into a 10,600-square-foot townhouse across the street from Jeffrey Epstein’s home. (A spokesman said Lutnick “never had any association with Epstein.”) But there was one important difference between Trump and Lutnick.
Trump was sparse on details — during his first term, aides learned to pare down their presentations to bullet points. Lutnick, on the other hand, was obsessed with minutiae. He has reached into nearly every corner of Wall Street—stocks, bonds, swaps, futures, derivatives, cryptocurrencies, and SPACs—and has built a successful career by meticulously mining tiny profits from large-scale transactions.
The difference turned into a disagreement during discussions about Trump’s media business. Trump was never the savviest when it came to scouting for partners, and he ultimately secured funding from a small investor who was later accused by the SEC of committing fraud in the deal. Lutnick looked elsewhere for investment, finding a company similar to Trump’s social platform, Rumble. The pro-MAGA platform is more like a YouTube knockoff than a Twitter one.
In September 2022, Lutnick took it public through a SPAC at Cantor Fitzgerald, making a killing on a favorable deal structure while small, inexperienced investors lost money. “If you’re not on Howard’s level, you’re just a piece of shit in his path,” says one former Cantor partner.
Now that Lutnick is back working with Trump, his attention to detail is once again on display.
Trump picked him to co-chair his transition team and later nominated him to be commerce secretary. While the president-elect focused on his social media accounts and headline-grabbing appointments, Lutnick toiled in recruiting for lower-level jobs that actually run the day-to-day operations of government.
Cantor Fitzgerald does business with a variety of federal agencies and departments, creating clear conflicts of interest. Yet as the Trump team picked people for agencies like the Commodity Futures Trading Commission — which fined Lutnick’s firm $6 million in 2022 for poor recordkeeping — Lutnick seemed to pay little attention to the ethics watchdog’s complaints and pressed forward with his plans. "He only cares about himself," said a former employee. "Trump is in the White House for his own benefit, and Howard Lutnick is in business for the same reason. They're both the same."
The son of a college professor, Lutnick has an older sister and a younger brother. Growing up on Long Island, he showed an aptitude for making money at an early age. As a child, he would buy boxes of new baseball cards and repackage them with old ones to sell. Some would be "jackpot packs" with five new cards; some would be "junk packs" with only one new card. Other kids loved the surprise, but Lutnick's joy came from certainty - he knew the repackaged cards would sell for three times the cost of the new cards.
Life got harder as he entered his teens. Lutnick's mother died when he was 16, and his father died when he was 18, leaving him and his sister to take care of his 15-year-old brother, Gary. Howard Lutnick continued to study at Haverford College in Pennsylvania, and Gary, who was at boarding school, would visit him on weekends.
He graduated in 1983 with a degree in economics and returned to New York to join Cantor Fitzgerald, led by charismatic founder Bernie Cantor, who became his mentor. Cantor loved arbitrage and kept jumping from one thing to the next, always looking for an edge. He eventually found a niche as a broker in the trillion-dollar Treasury market. Although the job itself was not glamorous, Cantor lived a lavish life and stayed in the White House as a guest of Bill Clinton.
Lutnick quickly made an impression. Two years after graduating from college, he was trading for some of Cantor's private clients. "Bernie couldn't stand anyone saying anything bad about this kid," a former company executive told Forbes nearly 30 years ago. "If you showed him evidence that Howard had crossed the line, he would say, 'Don't worry, he's young, let him learn.'" In 1991, at the age of 30, Lutnick took over day-to-day management of the company.
Controversy ensued.
Lutnick recruited many friends and family members into the firm, including his brother Gary, who, according to colleagues, would sometimes buy bonds ahead of customer orders and then quickly resell them to customers for a profit. Such behavior, which is clearly illegal in the stock market, may be allowed in the Treasury market, although it is morally controversial.
In 1994, the Securities and Exchange Commission fined Cantor Fitzgerald $100,000 for improperly recording transactions related to "risk-free investments" in Treasury auctions. Three years later, the firm agreed to pay $500,000 to settle a charge that it facilitated fraud, although it did not admit or deny the findings.
Even Bernie Cantor's family eventually had problems with Lutnick.
Around the time Lutnick became CEO, he convinced Cantor to change the company from a corporation to a partnership. In 1995, as Cantor's health deteriorated, Lutnick joined forces with two other partners to try to buy out the Cantor family's shares. The deal ultimately fell through, so Lutnick activated the "incapacity committee" agreed to in the partnership agreement in January 1996. The five-member committee voted to strip founder Cantor of control of the company, with three votes in favor and two abstentions. Cantor's wife, Iris, was one of those who abstained, and she subsequently sued. She received a large sum of cash, but lost control of the company and developed a deep distrust of Lutnick, even banning him from visiting Cantor's grave.
Lutnick turned the page and moved on.
He celebrated his 35th birthday at the Metropolitan Club in New York the weekend after Cantor's death. After taking charge, he expanded Cantor Fitzgerald from a single Treasury business to bonds, derivatives, swaps, futures and other fields. In 1996, the company's revenue tripled from 1991 to nearly $600 million. In the same year, he also launched an electronic brokerage platform called eSpeed based on his vision of the future, a move that later saved the company when tragedy struck.
Lutnick liked to live life to the fullest.
In the mid-1990s, he lived in Trump Palace, the tallest building at the time on Manhattan's Upper East Side. When he was not at home, he could often be found in his office on the 105th floor of the World Trade Center. But the unimaginable happened - at 8:46 a.m. on September 11, 2001, a plane crashed between the 93rd and 99th floors.
People's sympathy helped the company get through the difficult times.
After 9/11, electronic platform eSpeed gained market share, but then lost it again when it launched a new service that allowed bond buyers to pay more than three times the standard rate to get priority trading. As a result, customers left, and eSpeed eventually abandoned the practice. Lutnick continued to use all his tricks to optimize and adjust the structure of his business empire.
In 1999, Lutnick took eSpeed public, then merged it with other brokerage businesses in 2008 to form a public company called BGC Partners. However, the market was skeptical of the operation and lowered BGC's valuation, which one investor described as a "Howard Lutnick discount." Lutnick found a way around the problem by spinning off eSpeed from BGC and selling it to Nasdaq OMX Group in 2013 for $750 million in cash and stock to be paid over 15 years.
It turned out to be a wise move to properly isolate Lutnick’s wealth from his reputation.
As Nasdaq stocks rose, the shares paid became increasingly valuable, pushing the deal size to more than $2 billion, more than BGC’s market value at the time. To help him manage it all, Lutnick brought in a capable assistant, Anshu Jain, who served as co-CEO of Deutsche Bank from 2012 to 2015. During his tenure, the German institution provided Trump with $340 million in financing.
Lutnick also actively entered the real estate field, acquiring several businesses and merging them into Newmark, which was spun off from BGC in 2018. Newmark grew into a multi-billion dollar real estate services company that provides sales, lending, leasing and property management services. One of its clients was the Trump Organization, which hired Newmark to help sell its hotel in Washington, D.C. In addition to the real estate business, Newmark also received an additional asset in the spinoff - the right to BGC's Nasdaq shares. These shares pay income in December and bring in about $100 million a year.
Such deals require brains, and even Lutnick's enemies admit that he is smart. "Absolutely smart," said one opponent. "Very, very smart," added another. "All I can say," said a third, "is that Howard works hard and usually gets what he wants, no matter how he does it."
It's just that those ways don't satisfy everyone.
In June 2021, Lutnick allegedly asked the compensation committee of Newmark's board of directors to pay him a $50 million bonus for his role in the Nasdaq deal, which was reached four years before Newmark went public. A lawsuit filed by shareholders later said the committee initially decided to delay considering the bonus. The committee chair (whose husband died on 9/11) broke the news to Lutnick. Lutnick allegedly put on a show of strength to let everyone know that his boss was unhappy. Eventually the board reconsidered the issue. Lutnick received a $20 million bonus in 2021 and $10 million a year for the next three years, for a total of $50 million - exactly what he had requested.
The board, chaired by Lutnick, said the lawsuit was without merit and defended its decision to give him the bonus, saying that large bonuses would motivate Lutnick to work hard. And that may have had that effect for a few years. The last bonus will be paid at the end of 2024. The timing is perfect for Lutnick, who is likely to leave the company for a position in the president's cabinet about a month after receiving his bonus.
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