Latest / Serious Trouble / Sam Bankman Unfreed

Transcript

Sam Bankman Unfreed · Serious Trouble

• 0:08
  SPEAKER_00: Hi, it's Ken White.
• 0:10
  SPEAKER_00: And it's Josh Barrow, and this is Serious Trouble.
• 0:13
  SPEAKER_00: Ken, let's start this week with Sam Bankman Freed, who has been sentenced to 25 years in federal prison, which, on the one hand, 25 years is a long time.
• 0:21
  SPEAKER_00: On the other hand, the government had asked for 40 years, and the recommendation from the probation office, as they applied the federal sentencing guidelines to him, it was actually for 100 years because he stole so many billions of dollars.
• 0:34
  SPEAKER_00: Did he get off easy with this 25-year sentence?
• 0:36
  SPEAKER_00: No.
• 0:37
  SPEAKER_01: Well, to be fair, Josh, he probably wouldn't have had to have done the whole hundred years.
• 0:42
  SPEAKER_01: But sure, he got off a little light, but probably not as light as you're thinking.
• 0:47
  SPEAKER_01: It certainly started out looking like a very, very bad sentencing for Sam Bankman Freed because Judge Kaplan was finding against him on almost every issue that came up in terms of calculating the
• 1:02
  SPEAKER_01: the United States Sentencing Guidelines, which generate a recommendation.
• 1:06
  SPEAKER_01: He was finding all the factors against him.
• 1:08
  SPEAKER_01: He found that he had obstructed justice.
• 1:12
  SPEAKER_01: He had lied repeatedly during his testimony, went on for some time about how much he had lied in his testimony, how shocking it was, spent quite some time talking about the seriousness of his wrongdoing and how he was likely to do it again.
• 1:26
  SPEAKER_01: And then he surprised some people, having acknowledged that the guidelines allowed him to sentence him to life in prison by only giving him 25 years.
• 1:36
  SPEAKER_01: I think this is kind of like sentencing inflation so that we hear all these big numbers and life sentences and all that.
• 1:43
  SPEAKER_01: We start thinking, you know, 25 years, that's nothing.
• 1:46
  SPEAKER_01: Well, it's actually quite a lot of time out of your life.
• 1:49
  SPEAKER_01: I mean, that's being born, going to college and having a job for a few years is 25 years.
• 1:54
  SPEAKER_00: Well, is it actually 25 years?
• 1:56
  SPEAKER_00: If you're sentenced to 25 years, how much time are you actually going to do in prison?
• 1:59
  SPEAKER_00: Well, that's a good point.
• 2:00
  SPEAKER_01: So in the federal system, you already get off some amount of time for good time, about 15 percent.
• 2:06
  SPEAKER_01: And then there's some amount of time past that.
• 2:09
  SPEAKER_01: So during the Trump administration, they passed the First Step Act, which was aimed at first time offenders, which surprising as it seems, SBF is one of them.
• 2:21
  SPEAKER_01: So was Michael Avenatti the first time, by the way.
• 2:25
  SPEAKER_01: The First Step Act has a lot of different ways that the Bureau of Prisons can create programs that allow first-time offenders to do education and do other things while incarcerated to reduce their sentence.
• 2:40
  SPEAKER_01: Not all those programs have been implemented yet, so it's not all available yet.
• 2:45
  SPEAKER_01: But some people have calculated that assuming they get around to doing all that,
• 2:49
  SPEAKER_01: he could get his sentence for in custody reduced to as much as 14 and a half years, followed by a number of years in home detention or a halfway house or something like that.
• 3:02
  SPEAKER_01: So it could be a very substantial change.
• 3:05
  SPEAKER_01: But again, I think we lose sight.
• 3:07
  SPEAKER_01: America's sentences are in general much longer than other countries.
• 3:12
  SPEAKER_01: And we have this attitude that if it's anything less than the rest of your life, we're being wimps about it.
• 3:17
  SPEAKER_01: But I think what happened here is Judge Kaplan has seen a lot of white collar sentences.
• 3:22
  SPEAKER_01: And he thought this is a first time offender.
• 3:24
  SPEAKER_01: And he thought that, you know, 25 years is a big chunk of this guy's adulthood.
• 3:29
  SPEAKER_01: He'll be middle aged.
• 3:31
  SPEAKER_01: And I think he also probably thought about the type of fraud that SBF was involved in.
• 3:39
  SPEAKER_01: So, you know, famously, Bernie Madoff, the Ponzi schemer, got life.
• 3:44
  SPEAKER_01: But his scam was such that he knew he was deliberately ripping people off, right?
• 3:50
  SPEAKER_01: The whole essence of a Ponzi scheme is there's no product.
• 3:53
  SPEAKER_01: There's no way to make money.
• 3:55
  SPEAKER_01: The way he makes money is taking money from investors and giving some of it back to keep them biting.
• 4:02
  SPEAKER_01: Sam Backman-Fried probably seemed to the judge like someone who –
• 4:05
  SPEAKER_01: very deceitfully and dishonestly ran an enterprise that he wanted to succeed.
• 4:11
  SPEAKER_01: So it's probably kind of the distinction in Judge Kaplan's mind.
• 4:15
  SPEAKER_01: So if I had been betting, if you had made me bet on this ahead of time, Josh, I probably would have bet at about 30 years.
• 4:22
  SPEAKER_01: So he came in a little lower than I expected.
• 4:24
  SPEAKER_01: But the sentence does not shock me, and I don't think it shocks most people.
• 4:28
  SPEAKER_00: I thought it was remarkable both Sam Bankman Freed himself and his attorney, Mark McCasey, were sort of making arguments that I would not have thought would be received well by a judge in a sentencing like this.
• 4:40
  SPEAKER_00: You know, continuing to do the hagiography of Sam Bankman Freed and, you know, how he had big aspirations to do good things for the world.
• 4:48
  SPEAKER_00: which doesn't seem like it would land well with a judge who is about to say that he lied repeatedly about what he had been up to.
• 4:55
  SPEAKER_00: Sam Beckman-Fried was also relitigating these questions of exactly how bad the FTX business had been, arguing that they had a liquidity problem, not a solvency problem.
• 5:04
  SPEAKER_00: And so part of the issue there is not seeming to take responsibility.
• 5:07
  SPEAKER_00: But the other issue, an issue that the government raised,
• 5:10
  SPEAKER_00: is that it sort of suggests that SBF thought he had some bad luck here and continues to believe that he's some sort of genius with a ton to contribute to the world.
• 5:19
  SPEAKER_00: And they're concerned that if you let him out of prison, he's going to start another business like this.
• 5:23
  SPEAKER_01: Right.
• 5:24
  SPEAKER_01: I mean, I think that the relatively lenient in context result is pretty much in spite of the defense efforts and not because of them.
• 5:34
  SPEAKER_01: I think that's purely Judge Kaplan bringing his many years of experience to determining –
• 5:42
  SPEAKER_01: inappropriate sentence, not really moved at all by their arguments.
• 5:45
  SPEAKER_01: And I do think Judge Kaplan acknowledged there's a risk that he could do things again.
• 5:50
  SPEAKER_01: And he thinks that this length of a sentence is enough to kind of disable him.
• 5:54
  SPEAKER_01: Because, I mean, the world you come back out into after 15 years is dramatically different than the world that you left from.
• 6:04
  SPEAKER_01: So, you know, even if he does as few as 15 years, he's going to come back into totally different
• 6:11
  SPEAKER_01: technology, finances, you know, all that type of thing.
• 6:16
  SPEAKER_01: And it will be a challenge for him to sort of become a new con man.
• 6:21
  SPEAKER_00: Although... Well, as you know, he'll be middle-aged.
• 6:23
  SPEAKER_00: He'll be 46 if he gets out in 14 and a half years.
• 6:28
  SPEAKER_00: I mean, he's already done a few months, so the clock has already been ticking on this.
• 6:31
  SPEAKER_00: Right.
• 6:31
  SPEAKER_00: First of all, can you start an online crypto brokerage while you're under house arrest?
• 6:36
  SPEAKER_01: No, I think that there will be terms of house arrest that will prevent him from doing computer related business.
• 6:43
  SPEAKER_00: OK, so he'd have to wait until the entire sentence was finished.
• 6:47
  SPEAKER_00: Yes.
• 6:47
  SPEAKER_00: And I guess I don't know.
• 6:48
  SPEAKER_00: I don't know what the SEC is going to do here.
• 6:50
  SPEAKER_00: Maybe you can civilly ban him from the industry.
• 6:53
  SPEAKER_01: I'm sure the SEC will be trying to do things like that.
• 6:56
  SPEAKER_01: But precisely because crypto stuff is so weakly regulated, it's not clear how much it'll apply.
• 7:04
  SPEAKER_01: But yeah, I mean, he's going to be substantially older.
• 7:07
  SPEAKER_01: He will have missed most of the developments of a decade and a half at least.
• 7:13
  SPEAKER_00: And we'll see.
• 7:14
  SPEAKER_00: The other thing that we don't know what it will be like in 15 years is the frothy nature of the private venture market.
• 7:20
  SPEAKER_00: I mean, some people have been grimly joking on Twitter that if Sam Bankman Freed was let out of jail tomorrow, he'd immediately be able to raise another $100 million to start new business.
• 7:29
  SPEAKER_00: And maybe that's true.
• 7:31
  SPEAKER_00: I don't know.
• 7:32
  SPEAKER_00: But there's been a mania for some really dumb investments that's been going strong for a number of years now.
• 7:39
  SPEAKER_00: I mean, you know, Donald Trump has, you know, having his bacon saved by basically putting his face on a meme stock right now.
• 7:46
  SPEAKER_00: Maybe that'll be all done in 15 years.
• 7:48
  SPEAKER_00: Maybe not.
• 7:50
  SPEAKER_00: It's gone on longer than I expected it to to begin with.
• 7:52
  SPEAKER_00: But, you know, it's possible that Sam Eggman Freed will come out of federal custody into a world where people are just, you know, their patience for this shit has declined.
• 8:01
  SPEAKER_01: Yeah.
• 8:01
  SPEAKER_01: I mean, that may be a component of the judge's thinking, too.
• 8:05
  SPEAKER_01: You know, you're just not so much inclined to put someone in jail for life when they convince someone to give you their cow for a handful of magic beans.
• 8:12
  SPEAKER_01: There's a sort of a sensibility there that, you know, fuck around and find out on the victim level.
• 8:20
  SPEAKER_00: Well, I don't know.
• 8:21
  SPEAKER_00: I mean, one of the things the government went into is these ordinary investors who had put their money in FTX and had, you know, faced, you know, significant financial ruin as a result of that.
• 8:29
  SPEAKER_00: And I realize there are two ways you can look at that.
• 8:31
  SPEAKER_00: You can say, well, you know, buyer beware, you know, you put your money in crypto, you idiot.
• 8:37
  SPEAKER_00: But the other way you can look at it is, you know, FTX was a large business backed by, you know, very reputable entities advertising during the Super Bowl, pitching itself as, you know, sort of a financial services company.
• 8:49
  SPEAKER_00: It wasn't merely a place to do speculation.
• 8:51
  SPEAKER_00: You were supposed to be able to save your money there.
• 8:54
  SPEAKER_00: And so, you know, I assume that judges are generally reluctant to say, well, you know, because your marks were idiots or because your marks should have known better, we're going to give you a break on fraud.
• 9:05
  SPEAKER_01: They're reluctant to say it, but I think it does play into judicial thinking.
• 9:10
  SPEAKER_01: So I think that if this had been something closer to, you know, him, you know, robbing the pension funds of widows and orphans, I think the sentence is harsher.
• 9:26
  SPEAKER_00: Let's turn to Donald Trump.
• 9:27
  SPEAKER_00: We're going to talk about the criminal case in Manhattan in a moment.
• 9:30
  SPEAKER_00: I do want to talk about his meme stock since we've been talking about investment fads that are maybe not fads and go on for years and years and years.
• 9:38
  SPEAKER_00: And Donald Trump, his financial bacon quite possibly being saved by this IPO for Trump Media, which is worth several billion dollars in terms of its market capitalization.
• 9:48
  SPEAKER_00: People continue to be willing to pay in the high 40s per share for the company.
• 9:53
  SPEAKER_00: It's interesting that in spite of all this,
• 9:55
  SPEAKER_00: This is billions of dollars in wealth created essentially out of nothing for Donald Trump.
• 10:00
  SPEAKER_00: Both can help fix his significant financial difficulties caused by this judgment of hundreds of millions of dollars levied in the case brought by New York State.
• 10:09
  SPEAKER_00: Also, billions of dollars is just a fun and good thing to have.
• 10:13
  SPEAKER_00: It's still not enough for him.
• 10:14
  SPEAKER_00: He owns 58 percent of the now publicly traded Trump media.
• 10:18
  SPEAKER_00: But he's currently suing his co-founders, these two guys who were on The Apprentice, saying that they should lose their small stake in the company because he says they mismanaged it before he took it public and made billions of dollars.
• 10:31
  SPEAKER_01: Right.
• 10:32
  SPEAKER_01: So they own—these are Andy Latinsky and Wes Moss, and they own, I think, like 8.6 percent and 1.4 percent, respectively.
• 10:42
  SPEAKER_01: And Trump is basically setting them up as the patsies for everything that's surrounding Trump, the truth social, going public through the SPAC.
• 10:54
  SPEAKER_01: And he's blaming them, all the problems that have happened, he says, from their mismanagement.
• 10:59
  SPEAKER_01: The stock immediately tanking as it did.
• 11:02
  SPEAKER_01: He's blaming on their mismanagement.
• 11:03
  SPEAKER_01: They didn't, you know, plan all this bullshit.
• 11:07
  SPEAKER_01: And all I can say is, Sarah, can we get the Nelson Muntz ha ha in here?
• 11:14
  SPEAKER_01: I mean, I don't know what they expected.
• 11:17
  SPEAKER_01: You get into business with Donald freaking Trump constructing a castle out of wind.
• 11:26
  SPEAKER_01: What do you think is going to happen?
• 11:27
  SPEAKER_01: Do you think he's going to treat you right?
• 11:28
  SPEAKER_01: Do you think you're going to come out of this on top?
• 11:31
  SPEAKER_01: Do you think you're going to get your money?
• 11:33
  SPEAKER_00: Well, but I mean it's one thing to sue them and try to take away their stake.
• 11:37
  SPEAKER_00: It's another thing to actually succeed at that.
• 11:38
  SPEAKER_00: I mean they've also sued him in Delaware.
• 11:41
  SPEAKER_00: He's suing them in Florida and they say that he diluted them.
• 11:44
  SPEAKER_00: He basically issued more shares to himself, reducing the value of their stake and that that was not allowed and that they should own more of the company.
• 11:52
  SPEAKER_00: And I understand going to business with Donald Trump is unfavorable because he tries not to follow through on his commitments and you end up in all of this sort of litigation.
• 12:00
  SPEAKER_00: But on the other hand, if they come out of this –
• 12:03
  SPEAKER_00: with 10% or 5% or any stake in this, what is currently a $5, $6 billion company, for their trouble.
• 12:10
  SPEAKER_00: They're coming out of this with hundreds of millions of dollars.
• 12:12
  SPEAKER_00: It's quite possibly worth putting up with all of that nonsense.
• 12:15
  SPEAKER_00: And I realize they have to get through this litigation first, but does Trump actually have a good argument here?
• 12:20
  SPEAKER_00: I mean, if your business partner makes dumb business decisions, that doesn't necessarily mean that you get to take away their share of the company.
• 12:27
  SPEAKER_01: Well, yeah, it's expressed bizarrely.
• 12:30
  SPEAKER_01: But you do have basic duties of competence and fiduciary duties to the company as a director or officer.
• 12:36
  SPEAKER_01: And, you know, you can violate those by being incompetent.
• 12:40
  SPEAKER_01: Usually it would be monetary damages as opposed to somehow having to surrender your stock.
• 12:46
  SPEAKER_01: That's not normally a thing.
• 12:48
  SPEAKER_01: Josh, I agree that there could be some money for them at the end.
• 12:52
  SPEAKER_01: Quite a lot of money.
• 12:53
  SPEAKER_01: Like, you know, a few hundred million dollars is a lot of money.
• 12:56
  SPEAKER_01: Yeah.
• 12:56
  SPEAKER_01: But the question is, how long is this value of this entity going to hold?
• 13:01
  SPEAKER_01: And how much does that depend on what happens to Trump?
• 13:05
  SPEAKER_01: And, you know, how much is going to be worth at the end of litigation?
• 13:09
  SPEAKER_01: So, yeah, but you're right.
• 13:10
  SPEAKER_01: They'll probably come up with something.
• 13:13
  SPEAKER_01: But if they thought it was going to be uncomplicated, like, you know, it was going to hit and it was going to be payday and they were going to be rich without problems.
• 13:20
  SPEAKER_01: And that was extremely naive.
• 13:23
  SPEAKER_00: I strongly recommend, by the way, reading Matt Levine's Bloomberg newsletter.
• 13:26
  SPEAKER_00: He's been covering this a great deal and talking about the extent to which this company is basically a crypto coin in company form and how it's on some level a brilliant choice by Donald Trump to structure his brand in this manner.
• 13:40
  SPEAKER_00: OK, let's talk about this criminal trial in Manhattan.
• 13:42
  SPEAKER_00: There had been a gag order against Donald Trump in the criminal case that's proceeding in Manhattan, and Judge Merchant expanded the gag order.
• 13:50
  SPEAKER_00: Now it does bar Trump from making attacks on the family members of court staff, including, therefore, Judge Merchant's daughter.
• 13:58
  SPEAKER_00: How is this case going?
• 14:00
  SPEAKER_00: Well, you know, it's...
• 14:03
  SPEAKER_01: pretty wild and it's really stunning some people because, I mean, it seems objectively that what Trump's doing is so suicidal and reckless.
• 14:12
  SPEAKER_01: I mean, he's literally attacking the daughter of the judge who's going to be hearing the case.
• 14:18
  SPEAKER_01: And everyone knows that the judge hearing your case has a million ways to screw you over and a million little decisions that can have big impact that can go one way or the other.
• 14:29
  SPEAKER_01: But here, Trump keeps doing it until, as you said, the DA wrote to the judge and said, look, he's doing this.
• 14:36
  SPEAKER_01: We really think that your order should apply to family members of these people as well, of court staff and our office.
• 14:46
  SPEAKER_01: And the judge said, yes.
• 14:48
  SPEAKER_01: And the judge's logic isn't so much it's for the judge's own good.
• 14:53
  SPEAKER_01: I don't want to be intimidated.
• 14:55
  SPEAKER_01: It's more that what Trump is doing is sending a message that anyone who opposes him will have their family attacked.
• 15:02
  SPEAKER_01: And that message is very disruptive to the rule of law, makes it harder to get witnesses to cooperate, as generally degrades the process.
• 15:12
  SPEAKER_01: And so based on that, he expanded his prior order to include family members.
• 15:17
  SPEAKER_01: And Trump promptly went from attacking the daughter in his own words to just reposting other people attacking the daughter.
• 15:25
  SPEAKER_00: Is Judge Merchant's reasoning there legally sound?
• 15:27
  SPEAKER_00: I mean, we've talked about how the law has been poorly developed in this area and we got some development of it because Judge Chutkin in the D.C.
• 15:35
  SPEAKER_00: federal case imposed a gag order that actually got appealed and we got an appellate ruling on it.
• 15:40
  SPEAKER_00: I mean, it seems like you could justify a lot of restrictions using that sort of logic that, you know, well, if the defendant goes around talking like this, then people could infer that he'll say all sorts of other things.
• 15:49
  SPEAKER_00: Is that something the courts will go for if Trump appeals this?
• 15:52
  SPEAKER_01: I think Trump is a unique case.
• 15:55
  SPEAKER_01: He's an outlier just because the wealth of evidence he's generated, the record he's generated of this type of behavior, it makes a much stronger record for that position than almost any other case would.
• 16:10
  SPEAKER_01: I would find it difficult to imagine another defendant generating the same sort of record
• 16:17
  SPEAKER_01: unless it were like truly a criminal gang with a history of physically attacking witnesses or something like that.
• 16:23
  SPEAKER_01: But I think the judge has a point in that if you are a witness or a member of the court staff or a juror or anything like that, and you see this guy, Trump, doing what he brags he does, which is to go on the offensive, and you see, if I participate in this, not only is this person going to go after me, they're going to go after my kids, right?
• 16:40
  SPEAKER_01: That is really going to make it hard to get witnesses to cooperate.
• 16:44
  SPEAKER_01: It's going to make court staff and prosecution staff worried about participating.
• 16:50
  SPEAKER_01: It's going to deter jurors.
• 16:51
  SPEAKER_01: It's
• 16:53
  SPEAKER_01: Now, but what's going on here?
• 16:55
  SPEAKER_01: And Washington Post called me to talk about this.
• 16:58
  SPEAKER_01: You know, why is he doing this?
• 16:59
  SPEAKER_01: Is this the normal strategy?
• 17:00
  SPEAKER_01: And it's like, well, no, not at all.
• 17:02
  SPEAKER_01: But this is a continuation of the strategy, Josh, that you and I have been talking about for however many years, six years almost, that Trump...
• 17:11
  SPEAKER_01: takes on a political strategy that is harmful in the courtroom as opposed to a courtroom strategy that's harmful in politics.
• 17:19
  SPEAKER_01: So he is all in for the prospect that he is creating a public political narrative about things, that he is energizing his base, that he is encouraging donations and political support, and to the hell with what the consequences are in the courtroom.
• 17:36
  SPEAKER_01: He's just sort of writing that off on some level in favor of the political consequences, betting that he'll be able to use that public support, that narrative, and to really delegitimize the entire process in the court in a way that make it irrelevant whether or not they convict him.
• 17:55
  SPEAKER_00: Well, but so is it irrelevant?
• 17:56
  SPEAKER_00: This is not a federal court.
• 17:58
  SPEAKER_00: And so, you know, if there's a conviction here, I mean, I guess, first of all, is the thinking that, you know, no matter how much he antagonizes the judge, the nature of this charge and him also being a first time offender is that it's very unlikely that he would get a custodial sentence in this case.
• 18:11
  SPEAKER_00: That may be part of it.
• 18:12
  SPEAKER_00: Yes.
• 18:13
  SPEAKER_01: And this judge, like the other judges, is probably going to be bending over backwards not to seem biased, all the more so now, which is a very typical way that some judges get into their own head.
• 18:25
  SPEAKER_01: You know, they're so thinking about how I have to avoid looking biased that they wind up putting up with more bad behavior than they otherwise would.
• 18:33
  SPEAKER_01: from someone who hadn't attacked them.
• 18:35
  SPEAKER_01: So, yeah, he could be thinking this isn't a custodial case, although I think he should not be that confident in that, given his behavior and lack of contrition.
• 18:46
  SPEAKER_01: He's thinking it's minor.
• 18:47
  SPEAKER_01: He's thinking...
• 18:48
  SPEAKER_01: You know, what are they going to do?
• 18:51
  SPEAKER_01: Are they going to, you know, is the New York district attorney's office going to send investigators to try to arrest the reelected president of the United States in 10 months or however many months?
• 19:02
  SPEAKER_01: So I think that's probably part of his thinking.
• 19:05
  SPEAKER_01: Also, he's always been sort of a kick it down the road and see what happens type of guy.
• 19:10
  SPEAKER_01: Let's, you know, just create chaos, take up all the airwaves, get all the attention and let's see how it plays out.
• 19:16
  SPEAKER_01: Yeah.
• 19:17
  SPEAKER_00: Meanwhile, there's these proceedings in Florida.
• 19:21
  SPEAKER_00: Obviously, there's still the four criminal cases that Trump is dealing with.
• 19:25
  SPEAKER_00: And this one, the documents case before Judge Cannon, the last time we talked about this had to do with this sort of bizarre request from Judge Cannon about this question of what the jury instructions should say about whether Trump was allowed to take documents with him from the White House and keep them in a bathroom at Mar-a-Lago.
• 19:44
  SPEAKER_00: indulging this bizarre theory that Trump has that the Presidential Records Act, which is a law that is intended to ensure the preservation of presidential records, turning that law on its head and saying, actually, the law means that Trump can take any document he wants, convert it into a personal record, and then he's allowed to do whatever he wants with it.
• 20:01
  SPEAKER_00: And so Judge Cannon had basically asked for two versions of the jury instructions, both of which involved incorrect interpretations of the law, but one involving a really bizarre incorrect interpretation of the law, basically saying, well, what should I tell the jury about whether the president can be convicted of illegally possessing these documents in the case that the law allows him to possess whichever document he wants?
• 20:23
  SPEAKER_00: And so now both sides have responded to this.
• 20:25
  SPEAKER_01: Right.
• 20:25
  SPEAKER_01: And so Judge Cannon's scenarios were scenario A, the Presidential Records Act modifies the Espionage Act, which is not the law and it's kind of crazy.
• 20:35
  SPEAKER_01: But you could come up with a set of crazy instructions for that.
• 20:38
  SPEAKER_01: And her B scenario is, well, what if, in fact, like he says, Trump could simply convert things from classified to non-classified simply by taking them and taking them with him, which is crazy.
• 20:50
  SPEAKER_01: purely lunatic and no commentator who has any serious knowledge of this area of law thought that these scenarios were anything but crazy.
• 20:58
  SPEAKER_01: So the way they responded is very revealing.
• 21:02
  SPEAKER_01: Trump came back with a pleading that said, oh, scenario A, here's a complicated set of jury instructions for it.
• 21:09
  SPEAKER_01: But scenario B, judge, there wouldn't even be jury instructions because that would mean we win and you just dismiss it.
• 21:15
  SPEAKER_01: And that's correct, right?
• 21:16
  SPEAKER_00: I mean, if you take this completely bizarre legal theory, then there could be no crime here.
• 21:22
  SPEAKER_01: Exactly.
• 21:23
  SPEAKER_01: And that's why her request to do that one was so crazy in the first place.
• 21:27
  SPEAKER_01: So Trump sort of went on, you know, your question, it's so insightful.
• 21:31
  SPEAKER_01: Your scenario B is the right law.
• 21:33
  SPEAKER_01: Good for you.
• 21:34
  SPEAKER_01: You should dismiss it on that basis and for all these other reasons about how I'm being oppressed.
• 21:39
  SPEAKER_01: And then Jack Smith comes in.
• 21:41
  SPEAKER_01: And this is a very notable brief by Jack Smith.
• 21:44
  SPEAKER_01: So you're always – when a judge is wrong, it's always difficult to pick the tone with which you tell the judge that they're wrong because federal judges don't like being told they're wrong.
• 21:55
  SPEAKER_01: But sometimes they are.
• 21:56
  SPEAKER_01: So Jack Smith comes in.
• 21:59
  SPEAKER_01: incredibly firm but polite, basically saying, this can't be done.
• 22:04
  SPEAKER_01: You cannot create instructions like this because the law it's premised on is simply completely wrong.
• 22:11
  SPEAKER_01: And if your honor chose that law, then you should choose it in the context of granting the motion to dismiss, if that's what you think the law is.
• 22:19
  SPEAKER_01: Meaning, of course, they could immediately appeal.
• 22:22
  SPEAKER_01: But he says very strongly that he goes through all the ways that Trump has just made these theories up.
• 22:28
  SPEAKER_01: He traces how some people in the Trump cinematic universe have come up with these crazy theories and how they wound up in Trump's brief.
• 22:37
  SPEAKER_01: And he just basically says this is just completely flat wrong and you can't do jury instructions on it.
• 22:42
  SPEAKER_01: And then, and this is key, he talks about how the government has to have an appellate remedy.
• 22:47
  SPEAKER_01: And he cites some cases and this is a shot across the bow.
• 22:52
  SPEAKER_01: He cites some cases saying basically that there are scenarios where if a judge is contemplating very clearly wrong jury instructions, the circuit might give extraordinary relief issue.
• 23:04
  SPEAKER_01: It's got a writ of mandate because otherwise the government's out of luck.
• 23:07
  SPEAKER_01: Right.
• 23:07
  SPEAKER_01: Because if a judge instructs the jury wrong and the jury acquits, there's no appeal for that for the government.
• 23:13
  SPEAKER_01: Right.
• 23:14
  SPEAKER_01: So the special counsel lays out some of these cases that say that sometimes you can go up, ask for an emergency writ from the circuit, and they'll do it.
• 23:23
  SPEAKER_01: And actually, the blog Lawfare predicted this by about a week.
• 23:27
  SPEAKER_01: They even picked the same cases that they thought they would cite.
• 23:30
  SPEAKER_01: It was very sharp.
• 23:32
  SPEAKER_01: But clearly what Jack Smith is saying is stop fucking around or we're going to take an emergency writ to the circuit.
• 23:41
  SPEAKER_01: And the implicit threat is and then we're going to ask them to send it to somebody else.
• 23:45
  SPEAKER_00: Well, so, OK, let's start with that last part, because there's been a lot of fantasizing about the idea that appellate judges are going to take this case away from Judge Cannon.
• 23:54
  SPEAKER_00: My understanding, right, is that the bar to do that is really high.
• 23:58
  SPEAKER_00: It's very unusual for the appeals court to take away an ongoing case.
• 24:02
  SPEAKER_00: Right.
• 24:02
  SPEAKER_01: Correct, because the basic rule is you can't recuse a judge because you don't like their rulings.
• 24:08
  SPEAKER_01: Ruling against somebody, even being wrong and ruling against somebody, is not a basis to remove them.
• 24:14
  SPEAKER_01: But there is this area of discretion that the Court of Appeals has that they will take it away from the judge if the judge displays in the way they're doing things correctly.
• 24:25
  SPEAKER_01: such overt hostility or overt bias or repeatedly ignores instructions from the circuit or things like that, then they'll send it to a different judge.
• 24:37
  SPEAKER_01: It would be very unusual for that to happen
• 24:40
  SPEAKER_01: the first time a case went up to the circuit.
• 24:43
  SPEAKER_01: However, I mean, this comes after the civil case where they remanded it back to Judge Cannon with a huge spanking and basically an opinion saying that she had sort of completely transcended the bonds of logic and law and done something with no basis whatsoever.
• 24:59
  SPEAKER_01: I think that's going to be part of what the circuit is thinking about when they see this.
• 25:04
  SPEAKER_01: And if she basically does something crazy here, like either granting a motion to dismiss or
• 25:10
  SPEAKER_01: On Trump's crazy theories or basically saying, no, I'm not going to rule out now.
• 25:16
  SPEAKER_01: I'm going to reserve these issues for jury instructions.
• 25:19
  SPEAKER_01: Then I think that a court of appeal might say, yeah, you know, you're off this one.
• 25:26
  SPEAKER_01: We got to take you off.
• 25:27
  SPEAKER_01: That's interesting because it's just so outside the norms.
• 25:31
  SPEAKER_00: Boy, I'm sorry.
• 25:32
  SPEAKER_00: Even if she says here, because I mean, this is one of the issues that Jack Smith discusses in in his brief that, you know, the jury instructions don't necessarily need to be produced right now.
• 25:40
  SPEAKER_00: Right.
• 25:41
  SPEAKER_00: In a case like this.
• 25:42
  SPEAKER_00: And so one of the things he argues is the questions that Judge Cannon is focused on are purely questions of law.
• 25:48
  SPEAKER_00: There's no reason that she should need to wait until some evidence is heard in the case before deciding what the jury instruction should say on these issues.
• 25:55
  SPEAKER_00: And therefore, she must rule on this jury instruction issue now.
• 26:00
  SPEAKER_00: And so does that mean that, you know, if she if she produces some ruling and says, here are the jury instructions and the jury instructions are crazy, then obviously you will have, you know, an extraordinary appeal from the government here.
• 26:11
  SPEAKER_00: If she decides not to produce the jury instructions yet, will they still be able to go to the appeals court right now and say she's indicated that she's going to do something weird on this and she's not telling us what it is yet?
• 26:21
  SPEAKER_00: And so you need to make her to make her tell us now what the jury instructions will be.
• 26:25
  SPEAKER_00: They could try, but that's a much harder case.
• 26:27
  SPEAKER_00: OK.
• 26:27
  SPEAKER_01: So if basically she backs off and says, OK, I'm going to reserve these issues until we do the jury instructions.
• 26:34
  SPEAKER_01: I'll decide then.
• 26:35
  SPEAKER_01: I think they still try because I think that's still signaling that she may well do something completely crazy at a time when the government won't be able to appeal and there'll be no remedy.
• 26:47
  SPEAKER_01: Oddly, if we imagine Judge Cannon as sort of a sinister figure who wants to tank the case for Trump, then it would have been better for her not to be overt about all this, not to be openly crazy like this.
• 27:00
  SPEAKER_01: The best thing to do is just, you know, see the jury and dismiss it.
• 27:04
  SPEAKER_01: You know, decide then that you've reconsidered and indeed Trump could declassify with his mind and therefore this is dismissed.
• 27:12
  SPEAKER_01: There's no there's no appeal from that.
• 27:14
  SPEAKER_01: So this way, in a way, kind of cuts against the idea that she is determinedly in the tank for Trump.
• 27:23
  SPEAKER_01: I continue to think that like the vast number of judges, she's complicated.
• 27:29
  SPEAKER_01: I think she's strongly biased towards Trump.
• 27:31
  SPEAKER_01: I think she's inexperienced.
• 27:33
  SPEAKER_01: I think she's in over her head on these issues.
• 27:37
  SPEAKER_01: And I think all that is coming out in this way.
• 27:40
  SPEAKER_01: But I don't think that she's quite the mustache twirling B-movie villain who is planning out the best possible way to help Trump because that would be different.
• 27:52
  SPEAKER_00: And then one other possibility of the way this could play out, and this is a scenario that would occur quite a long time from now.
• 27:58
  SPEAKER_00: is suppose they get into trial and she's reserved this jury instruction issue.
• 28:02
  SPEAKER_00: And then, you know, once the jury's been seated, she produces a jury instruction that is incorrect and that is likely to have the effect of tanking the government's case.
• 28:11
  SPEAKER_00: There was at least one of these appellate cases that Lawfare flagged where the government was able to appeal at that stage, like in the middle of the trial to get the jury instruction changed.
• 28:22
  SPEAKER_00: Is that is that something that's available to Jack Smith?
• 28:24
  SPEAKER_00: That's super hard and depends on timing.
• 28:26
  SPEAKER_01: I mean, if the judge says, I've selected this jury instruction to call in the jury, I'm going to instruct them, you know, clearly you can't appeal.
• 28:34
  SPEAKER_01: But if you have like overnight or something like that, then you can rush to the circuit with, you know, screaming emergency.
• 28:40
  SPEAKER_01: And the circuit might shut it down very quickly.
• 28:43
  SPEAKER_01: You know, we've seen cases recently where sometimes the circuit will get involved and shut things down on an emergency basis.
• 28:50
  SPEAKER_01: Like that case out here in California, the federal case against the rioters where the federal judge was deciding that it was selective prosecution.
• 28:58
  SPEAKER_01: The circuit acted within 24 hours in that.
• 29:01
  SPEAKER_01: And I could see the U.S.
• 29:03
  SPEAKER_01: Attorney's Office preparing papers to file and getting some sort of emergency relief, staying what was going on.
• 29:10
  SPEAKER_01: While they looked at it, it is extraordinary.
• 29:13
  SPEAKER_01: And the types of cases you've seen it in before are cases, you know, there's a kind of a sad one where there's a was an 89 year old federal judge who clearly was suffering from some of the effects of age and started ordering completely nonsensical jury instructions that would make the any conviction flawed and liable to be overturned.
• 29:35
  SPEAKER_01: And he did it twice in two different cases.
• 29:36
  SPEAKER_01: So they went up and they got him removed and they got right jury instructions.
• 29:43
  SPEAKER_00: Let's talk about Hunter Biden.
• 29:45
  SPEAKER_00: Hunter Biden filed a motion to dismiss the charges against him on a number of different grounds, saying that the venue was incorrect, that they had an agreement for diversion in these cases.
• 29:57
  SPEAKER_00: And that agreement was binding, even though the judge in Delaware denied.
• 30:00
  SPEAKER_00: didn't accept it.
• 30:00
  SPEAKER_00: It was just an agreement between the government and Hunter Biden, and therefore they shouldn't be allowed to prosecute him.
• 30:05
  SPEAKER_00: They said that he is a victim of selective and vindictive prosecution.
• 30:09
  SPEAKER_00: They said that the special counsel, David Weiss, was not appointed in a legally valid way.
• 30:14
  SPEAKER_00: So they had something like eight different arguments about why this case should be dismissed, and the federal judge handling this case in Los Angeles rejected all of them.
• 30:22
  SPEAKER_01: Right.
• 30:23
  SPEAKER_01: In one big motion and sometimes not on the grounds that the government was urging.
• 30:29
  SPEAKER_01: So kind of the big issue here was that whole mess with the plea agreement that fell apart last year in Delaware.
• 30:37
  SPEAKER_01: And you remember he was going to plead to two misdemeanor failure to file charges and he was going to get a diversion agreement on the gun charge with an immunity agreement that he wouldn't be prosecuted for other things not very well defined.
• 30:52
  SPEAKER_01: And everyone's commented how that set of agreements was just a mess, a complete trash fire, subject to all sorts of different interpretations, confusing.
• 31:02
  SPEAKER_01: The judge said, you know, hell no.
• 31:04
  SPEAKER_01: And then once the government wouldn't endorse Hunter Biden's lawyers very broadly.
• 31:11
  SPEAKER_01: interpretation of the immunity agreement, he backed out and the whole thing fell apart.
• 31:16
  SPEAKER_01: So he was arguing here that that immunity agreement that was part of the diversion agreement under which he wouldn't be prosecuted for the gun charge applied and that it was binding.
• 31:26
  SPEAKER_01: And the government said, no, it wasn't because, you know, you backed out of it.
• 31:31
  SPEAKER_01: What this judge said is none of that's right.
• 31:34
  SPEAKER_01: The judge leaps into, you know, 10 pages of first year contracts analysis and says, basically, no, if you look at this, a condition precedent to the contract being enforceable is a probation office has to sign it and approve it.
• 31:47
  SPEAKER_01: And they didn't.
• 31:48
  SPEAKER_01: So the conditions for the contract never came into being.
• 31:51
  SPEAKER_01: So it's not enforceable, which is not what either of them argued.
• 31:54
  SPEAKER_01: Right.
• 31:55
  SPEAKER_01: Bottom line, he said no.
• 31:57
  SPEAKER_00: But it's correct in your view?
• 31:58
  SPEAKER_01: Yeah, I think it's perfectly plausible.
• 32:01
  SPEAKER_01: And it's a good example of how you get in – you get super close to a case and you don't see other arguments than the ones you've been arguing in a case.
• 32:10
  SPEAKER_01: Then the judge said basically he rejects the improper appointment.
• 32:16
  SPEAKER_01: You know, there's one of the special counsel regulations says the person should come from outside of the government.
• 32:22
  SPEAKER_01: You know, Weiss was a U.S.
• 32:24
  SPEAKER_01: attorney.
• 32:25
  SPEAKER_01: Judge says, well, but that's not the only source of authority to appoint Weiss.
• 32:29
  SPEAKER_01: There are a bunch of other sources and those don't have the same requirements.
• 32:32
  SPEAKER_01: That's fine.
• 32:34
  SPEAKER_01: He rejects the selective and vindictive prosecution claims.
• 32:40
  SPEAKER_01: The selective one is the one that you're prosecuting me out of politics.
• 32:44
  SPEAKER_01: Vindictive is you're prosecuting me because I backed out of that deal in Delaware.
• 32:48
  SPEAKER_01: So that's the difference.
• 32:50
  SPEAKER_01: And the judge finds there's not enough evidence.
• 32:53
  SPEAKER_01: Evidence on that.
• 32:53
  SPEAKER_01: He says you haven't shown similarly situated people who weren't prosecuted.
• 32:58
  SPEAKER_01: You haven't shown there are similar cases where people skate for doing this stuff.
• 33:03
  SPEAKER_01: And it would be very hard to do that because the stuff Hunter did is pretty vivid in terms of his tax shenanigans.
• 33:09
  SPEAKER_01: And then finally, he refuses to dismiss it for outrageous government misconduct.
• 33:14
  SPEAKER_01: And we've talked about this before.
• 33:16
  SPEAKER_01: There's this sort of ill-defined zone where if the government just does something so completely outrageous that it shocks your conscience, even if there's not a specific law rule about it, the judge can dismiss the case.
• 33:27
  SPEAKER_01: Here, Hunter Biden's lawyers were saying that these two IRS agents, Shapley and Ziegler,
• 33:33
  SPEAKER_01: were out leaking information, talking to the press, trash talking Hunter Biden and Joe Biden to some extent, and that that was so outrageous that it should be dismissed.
• 33:41
  SPEAKER_01: And the judge said, no, you know, kind of leaving aside the issues of whether these two agents' actions get attributed to the whole prosecution, leaks by a government agent are bad, but they're not up at the shocks of the conscience level.
• 33:55
  SPEAKER_01: Is that sort of the analysis you would expect on that issue?
• 33:57
  SPEAKER_01: Yeah, it is.
• 33:58
  SPEAKER_01: I would have expected a little more analysis on how these two guys aren't essential to the prosecution.
• 34:06
  SPEAKER_01: They don't have to rely on them for evidence, and they don't get attributed to the whole team.
• 34:11
  SPEAKER_01: But the shocks to the conscience standard is really, really high.
• 34:14
  SPEAKER_01: Generally, when you see it, something's been done like torture or something really horrific done to a witness, something that generally does make you say, holy shit.
• 34:27
  SPEAKER_01: That's terrible.
• 34:28
  SPEAKER_01: And so sometimes we've seen some entrapment cases where it doesn't meet the traditional definition of entrapment, but the judges are so outraged by the government basically manufacturing the entire crime, they've used that.
• 34:43
  SPEAKER_00: Finally, let's talk about John Eastman.
• 34:45
  SPEAKER_00: John Eastman, a one-time luminary of the conservative legal academic movement.
• 34:50
  SPEAKER_00: He was the dean of Chapman University Law School in Orange County, California.
• 34:56
  SPEAKER_00: He's also one of the legal architects of Donald Trump's efforts to overturn the 2020 election, pushing these theories about how
• 35:03
  SPEAKER_00: Mike Pence had the authority to decline to count certain electoral votes and basically could hand the presidency the second term to Donald Trump if he chose to do so.
• 35:12
  SPEAKER_00: And so he has faced bar discipline over this.
• 35:16
  SPEAKER_00: And now there's a there's been a proceeding in which it's been recommended that he will lose his law license in the state of California.
• 35:23
  SPEAKER_01: Right.
• 35:23
  SPEAKER_01: There was a lengthy bar trial a few months ago, tons of witnesses.
• 35:28
  SPEAKER_01: Eastman himself called a number of luminaries as witnesses.
• 35:33
  SPEAKER_01: He had tons of character evidence.
• 35:36
  SPEAKER_01: And really, the main fight was about was this a bar violation or is this just zealous advocacy for your client, you know, pushing the envelope?
• 35:46
  SPEAKER_01: And was it really him lying or was it him?
• 35:51
  SPEAKER_01: You know, articulating theories that he sincerely believed, because generally you're not supposed to be disbarred for being wrong about the law, right?
• 35:58
  SPEAKER_01: No, you're not.
• 36:00
  SPEAKER_01: That comes within zealous advocacy.
• 36:01
  SPEAKER_01: But generally, you have to have a good faith belief in what you're saying.
• 36:04
  SPEAKER_01: And what the bar said is that.
• 36:08
  SPEAKER_01: No, this is clearly not a sincere, honest belief in the things he's saying because he's ignoring all these pieces of evidence and all these people telling him that this is just wrong, that it's not true.
• 36:20
  SPEAKER_01: And he consistently says things in the face of overwhelming evidence that they're not true.
• 36:27
  SPEAKER_01: It's kind of like the actual malice test for defamation that the bar is talking about here, where he's consistently looking away from evidence that shows he's wrong and that his actions show that these are lies and not just zealous advocacy.
• 36:42
  SPEAKER_01: And zealous advocacy doesn't include deliberately lying to a tribunal or anything like that and does not include saying things that – pushing narratives that you have no good faith basis to believe are true.
• 36:56
  SPEAKER_01: And then the bar goes through the typical mitigating and aggravating circumstances analysis and just says that this is, you know, this is again, there's no precedent for this.
• 37:05
  SPEAKER_01: There's no case anywhere near this bad.
• 37:08
  SPEAKER_01: It's so unprecedented.
• 37:09
  SPEAKER_01: We think he has to be disbarred.
• 37:11
  SPEAKER_00: And so then this has to go to the Supreme Court of California.
• 37:13
  SPEAKER_01: Yes.
• 37:14
  SPEAKER_01: And they generally, with only very rare exceptions, endorse what the bar suggests.
• 37:20
  SPEAKER_00: How is this being received by attorneys in California?
• 37:37
  SPEAKER_00: And so is this seen as a useful course correction by the state bar?
• 37:43
  SPEAKER_00: Is this extending also to – I mean because this is not the ordinary kind of attorney misconduct that the bar is dealing with.
• 37:49
  SPEAKER_00: This is not the – when you think about our attorneys being supervised enough, this isn't a typical case for that.
• 37:54
  SPEAKER_00: But is this being seen as an indication that the bar is being more aggressive in a general way that's good?
• 37:59
  SPEAKER_01: I think it's seen as for now more for show than substance.
• 38:03
  SPEAKER_01: So, you know, they've tried to finally get around to going against Girardi.
• 38:08
  SPEAKER_01: They've gone against Eastman.
• 38:10
  SPEAKER_01: They've gone against what's his face?
• 38:12
  SPEAKER_01: Oil spill boy.
• 38:13
  SPEAKER_01: Oil spill boy.
• 38:16
  SPEAKER_01: You know, the guy in the White House, the lawyer, the pantsless one.
• 38:20
  SPEAKER_01: Oh, Jeffrey Clark.
• 38:21
  SPEAKER_01: Jeffrey Clark.
• 38:22
  SPEAKER_01: Thank you.
• 38:22
  SPEAKER_01: Jeffrey Clark, the guy from the Department of Justice.
• 38:24
  SPEAKER_01: They're going after him on what happened to his pants.
• 38:27
  SPEAKER_01: I don't remember the issue with his pants.
• 38:28
  SPEAKER_01: Well, when his house was searched, he was detained outside in a dress shirt and boxers.
• 38:36
  SPEAKER_01: So anyway, they're going after him.
• 38:39
  SPEAKER_01: But all of these are like extreme cases.
• 38:41
  SPEAKER_01: These are outliers.
• 38:43
  SPEAKER_01: And basically the bar is throwing a gigantic amount of resources into prosecuting a few very big, very historical cases that will get a lot of attention.
• 38:54
  SPEAKER_01: So there's a deterrence element.
• 38:56
  SPEAKER_01: But the problem –
• 38:58
  SPEAKER_01: with law practice is really not at that level.
• 39:01
  SPEAKER_01: The problem is a lot of bad behavior on a much lower, much pettier level.
• 39:07
  SPEAKER_01: And I don't think the bar has the resources right now to dramatically change that.
• 39:13
  SPEAKER_01: So, you know, they're still going to keep chugging along the way they always do, I think, with most cases.
• 39:19
  SPEAKER_01: I think they will, however, be very careful with anyone who's sort of a, you know, a big famous person.
• 39:26
  SPEAKER_01: They're going to be very careful about the appearance.
• 39:28
  SPEAKER_00: that they're cutting them a break.
• 39:30
  SPEAKER_00: Well, I think we can leave it there this week.
• 39:31
  SPEAKER_00: Ken, thank you so much as always.
• 39:33
  SPEAKER_00: Thank you, Josh.
• 39:34
  SPEAKER_00: Serious Trouble is created and produced by Very Serious Media.
• 39:37
  SPEAKER_00: That's me and Sarah Fay.
• 39:38
  SPEAKER_00: Jennifer Swadik mixed this episode.
• 39:39
  SPEAKER_00: Our theme music is by Joshua Mosier.
• 39:41
  SPEAKER_00: Thanks for listening.
• 39:42
  SPEAKER_00: We'll be back with more soon.
• 39:43
  SPEAKER_00: See you next time.