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Written by Danny Crichton

Canada court finds against Huawei CFO Meng Wanzhou on double criminality; extradition trial to continue

In a closely-watched decision today, the Supreme Court of British Columbia published a key decision in the extradition case of Meng Wanzhou, the CFO of Huawei Technologies, China’s largest telecommunications company and a frequent target of U.S. policymakers.

In its ruling, the court said that the case met the standard for “double criminality,” and thus the extradition hearing will be allowed to continue. That decision represents a major blow to Huawei, which had hoped to end the suit and bring Meng home back to China.

It’s a pivotal moment in the long-running saga over the fate of Meng and Huawei itself. She was arrested at Vancouver International Airport on December 1, 2018 at the request of U.S. authorities, who eventually indicted her and Huawei itself with a bevy of fraud charges.

Those charges stemmed from an investigation by the U.S. Department of Justice looking into Huawei’s ties with a number of affiliates including Skycom Tech Co Ltd, which is alleged to have sold telecommunications equipment to Iran in violation of U.S. sanctions. Huawei uses American technology in its products, and under U.S. export laws, companies are forbidden from transferring that technology to countries under sanction. Huawei has previously denied that it controlled the companies, and has vigorously defended itself in the case.

Meng has been under house arrest in Vancouver for almost a year and a half pending deliberations of the Canadian courts. The case has seen intense scrutiny from China, the U.S. and Canadian authorities, and has become a symbol of the continuing trade fight between the U.S. and China.

Today’s decision comes from a narrowly focused court hearing in January on a Canadian legal doctrine known as “double criminality,” which states that a subject needs to face criminal charges in both Canada and the receiving country in order for an extradition to be approved. While courts generally handle all aspects of extradition at once, the judge in this case, associate chief justice Heather Holmes, decided to split Meng’s extradition hearing into phases, given that without double criminality, the case would be automatically closed.

VANCOUVER, BC – JANUARY 20: Huawei Technologies Chief Financial Officer Meng Wanzhou is escorted by her security personnel as she leaves court during a break for lunch on the first day of her extradition trial on January 20, 2020 in Vancouver, Canada. (Photo by Jeff Vinnick/Getty Images)

The decision on Meng, who is the daughter of Huawei’s founder and CEO Ren Zhengfei, is just one of many different battles that Huawei has faced in recent months.

Over the weekend, the company faced a new blow to its prospects in the West after the United Kingdom, which had been a lukewarm but steady supporter of using Huawei’s equipment in its next-generation 5G networks, announced that it was reversing its decision and would wean itself off of Huawei equipment over the coming years.

Meanwhile in the U.S., the Trump administration has focused intently on the company as it attempts to shift the balance of power in the United States’ trade relations with China. Two weeks ago, the Trump administration extended its technology export restrictions on Huawei, endangering the company’s ability to product its chips and smartphones. TSMC, the world’s largest contract semiconductor fab, said that it wasn’t accepting new orders from Huawei in light of the new restrictions. At the same time, TSMC announced a massive, $12 billion manufacturing facility in Arizona.

While the Trump administration has made economic combat with Huawei a policy priority, that strategy has not been endorsed by the entire federal government, with departments and agencies like the Department of Defense worried that the restrictions on export licenses could ultimately have deleterious, second-order effects on American industrial competitiveness.

Indeed, given the continuing situation with the U.S., Huawei itself has said that one of its most important missions is to build its equipment using entirely domestic Chinese components, veering around U.S. export controls and breaking free of their confines. Assisting on that front is China’s government itself, which has put up billions of dollars in new funding to build up its domestic chipmaking capabilities.

It’s a complex situation, and one that Western policymakers have struggled to come to a unified approach on. As our writer Scott Bade described a few weeks ago, countries like Australia, the United Kingdom, and the United States are struggling to come to agreement on Huawei and China’s tech forays more generally, with each country approaching the issue from its own point-of-view and from different levels of engagement with the Chinese mainland.

While the Meng case is just the latest salvo in the on-going battle here, expect more skirmishes ahead.

LeverEdge wants to get you and your friends a volume discount on student loans

Student loans are both a trillion-dollar debt category and also one of the most popular mini-verticals out there in fintech startup investing right now. There are dozens if not hundreds of companies in the space, and they all mostly do one of two things: either they help students think through their student loan options before choosing one (acting as a financial advisor to avoid mistakes) or they help students after they finish school figure out how to optimize their repayments or acquire loan forgiveness.

And so when I heard the pitch for LeverEdge, I was intrigued, because it really doesn’t fit either bucket.

Rather than approaching each user individually and trying to optimize their own financial decision independently, LeverEdge proposes helping students band together as a group and negotiate reduced student loan rates by essentially acting as a collective bargaining unit with banks.

For founders Chris Abkarians and Nikhil Agarwal, the idea came as they were entering Harvard Business School.

The two connected with some other HBS students through online new admit groups on Facebook and came up with the idea of trying to work together to lower their interest rates. The annual cost of attendance at HBS is $111,102 right now (annually!), so multiplied by two for the two-year MBA and you are looking at potentially massive cost savings if you can lower your interest rate.

There was just one problem: banks loved the idea, but no one knew how to actually negotiate interest rates at individual branches. As Agarwal explained, “So after work we would try to leave at a reasonable time to get to the bank branch before it closes and then pitch the branch manager on this. They were super excited, but then they’d be like, well, I don’t know what to do with this, I can’t change interest rates for you.”

So Abkarians started sending cold emails to bank CEOs with the same proposition, and also got a positive response, but was told that he would need much more volume to make a negotiated deal worthwhile for banks. At the time, the two only had 50 to 70 people working together, but they spread the option around more heavily with their classmates and students at other business schools and eventually got to 700 students with $26 million in loan volume over the next 10 days.

With that scale, the two were able to negotiate a competitive rate with a bank that saved each student an average of $15,000 in fees over the full life of their loans according to their calculations.

They did all this entirely virtually too. Abkarians and Agarwal eventually met for the first time in person at Harvard in the fall, still with a whirl of excitement over what had transpired over the summer. They started asking for feedback from their users about the process, and Agarwal said:

The number one negative feedback we got was you closed the deal on July 26, [but] I couldn’t use it because my tuition due date was before that day. And then every other piece of feedback — even for this haphazardly run group — was incredibly amazing. And that really convinced us [… that] we owe it to our members and really the future generation of classes to make this a thing.

LeverEdge is taking that one-off experience and systemizing it for more students in more contexts. The startup, which was officially founded in May 2018, targets the private student loan market outside of federal programs typical for most undergrads. That loan market typically has higher (and sometimes dramatically higher) interest rates than traditional federal student loans, and lenders also has the flexibility to negotiate interest rates unlike with federal loans.

Today, LeverEdge has more than 15,000 students on its platform and has financed $100 million in student loans according to the startup. It also raised a $2.5 million seed round led by NFX along with Global Founders Capital and founders from fintech companies Earnest and SoFi.

The company spends most of the year aggregating students for the next school year, and then “we spend around two months in this auction process between different lenders,” Abkarians said. The company currently has nine employees, and “our staff is focused on partnership building,” he said.

The new version of a startup team photo. LeverEdge Team, photo via LeverEdge

As for business model, LeverEdge takes a pre-set referral fee from lenders upfront for each tranche of loans that they negotiate between students and the lender. That fee is “non-negotiable” according to Agarwal, and all lenders participating in the auction agree to pay it if they have the winning bid. The company varies the fee based on the loans that are grouped together (Agarwal said that, for example, refinance loans have a lower referral fee than other student loans). He believes this approach ensures that LeverEdge always has the right incentives to get the best prices for students.

Importantly, no student is obligated to take the final loan as negotiated by LeverEdge. But, if the company is doing its job, then the offered loan should be competitive with any alternative loan on the market. “We still encourage people to compare it against other things and if they find anything that is better than what we’ve found to please just let us know. No one has yet,“ said Abkarians.

The big question now is what will happen this coming school year given COVID-19. On one hand, students may avoid campuses knowing that schools are moving heavily toward virtual classes due to social distancing policies. On the other hand, economic recessions and greater concerns around costs may lead more students to seek out cheaper student financing options: exactly the customers that LeverEdge wants to find.

Overall, it’s an interesting play on the student loan space and one of the more interesting fintech startups I have seen in some time.

Equity Morning: Remote work startup fundings galore, plus a major court decision

Good morning and welcome back to TechCrunch’s Equity Monday, a brief jumpstart for your week.

This is a messed-up edition, because we are both hosting Equity Monday on Tuesday (because that makes sense) and our normal host Alex Wilhelm is on vacation, leaving (editor’s note: poor and massively underpaid) managing editor Danny Crichton to wake up early on the first day of the workweek to talk to himself in front of a microphone.

Here’s what we (okay I) talked about this morning:

Equity will be back Friday morning with more. Welcome to the week!

Equity drops every Monday at 7:00 AM PT and Friday at 6:00 am PT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.