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Weaponization Fund Challenge & SBF's Appeal Fails · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grosseo from Bloomberg Radio.
0:08
Speaker 2: President Trump's one point eight billion dollar fund for alleged
0:12
Speaker 2: victims of political weaponization faced rare pushback from Republicans as
0:17
Speaker 2: well as from Democrats, who slammed the proposal as a
0:21
Speaker 2: slush fund for the president's allies and supporters. Acting Attorney
0:25
Speaker 2: General Todd Blanche testified on Capitol Hill two weeks ago
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Speaker 2: that the fund would not go forward, while at the
0:32
Speaker 2: same time describing its importance.
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Speaker 3: The reasons for the fund is something that President Trump
0:38
Speaker 3: talked about for a long time, which is the fact
0:41
Speaker 3: that there were a lot of people in this country
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Speaker 3: who had their government weaponized against them. The reasons for
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Speaker 3: the fund, I think it remained as important as they
0:50
Speaker 3: were before. But we are not moving forward with the fund.
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Speaker 2: And President Trump has continued to express support for the fund.
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Speaker 1: Excuse President to clarify on what you were asked earlier.
1:02
Speaker 2: Is the one point eight billion dollar DUJ fund dead?
1:05
Speaker 3: Or is it on hold?
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Speaker 4: It's I'd have to ask the lawyers. I don't know.
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Speaker 4: I know one thing, the weaponization. Are you taking.
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Speaker 3: The weaponization fund?
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Speaker 4: As far as I'm concerned, was a beautiful thing well.
1:20
Speaker 2: A federal judge in Virginia used Trump's own words against
1:24
Speaker 2: the government in ruling that a lawsuit challenging the fund
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Speaker 2: can go forward. Judge Leoni Brinckhema rejected the government's arguments
1:33
Speaker 2: that Blanche's public statements that the plan was dropped were
1:36
Speaker 2: enough confirmation. She gave the government one week to submit
1:41
Speaker 2: a written sworn statement signed by Blanche and Treasury Secretary
1:45
Speaker 2: Scott Bessant, declaring that the fund will not be pursued.
1:50
Speaker 2: My guest is Amy Powell, litigation director at Lawyers for
1:53
Speaker 2: Good Government and a former senior Trial council at the
1:57
Speaker 2: Justice Department. Amy explain why juds bring them all issued
2:01
Speaker 2: a preliminary injunction and didn't accept the government's arguments that
2:06
Speaker 2: the case was moot.
2:07
Speaker 1: Now she needed evidence. She needed the government to develop
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Speaker 1: a record as to the fact the fund isn't going forward.
2:15
Speaker 1: If it's really not going forward in any way, shape
2:18
Speaker 1: or form, it's frankly bizarre that the government filed insisting
2:23
Speaker 1: that the case was moved based on the Acting Attorney
2:27
Speaker 1: General's unsworn and equivocal statements on the subject.
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Speaker 2: There are five lawsuits challenging the fund. I believe who
2:33
Speaker 2: is bringing this particular lawsuit.
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Speaker 1: One of them is a former federal prosecutor. Some are
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Speaker 1: nonprofits who feel like they might be targeted as a
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Speaker 1: result of the operation of the Weaponization Fund if it
2:45
Speaker 1: were likely to go forward, and they're represented, I believe,
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Speaker 1: by Democracy Forward in that case. They are people who
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Speaker 1: feel like they would be harmed by the operation of
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Speaker 1: the fund. Now, it's going to be an uphill battle
2:58
Speaker 1: for any of these plaintifts to prove that they individually
3:00
Speaker 1: would be injured by the operation of the fund if
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Speaker 1: it went forward, But they made it compelling the case
3:06
Speaker 1: as possible when the government came in and insisted it's
3:08
Speaker 1: all moot that the Weaponization Fund isn't going forward, despite
3:12
Speaker 1: the existence of an unrescinded apparently Attorney General order creating
3:17
Speaker 1: the fund and a settlement agreement that, as far as
3:20
Speaker 1: I know, the government still insists is ballot.
3:23
Speaker 2: I mean, the standards for getting a preliminary injunction are
3:26
Speaker 2: pretty high. Did the judge find that the plaintiffs or
3:30
Speaker 2: some of the plaintiff's head standing.
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Speaker 1: No, as far as I know, the court has not
3:35
Speaker 1: ruled on that. Decided to turn first to this question
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Speaker 1: of mootna. She hasn't rules on the merits of the
3:42
Speaker 1: underlying claim, but she has strongly suggested that if the
3:46
Speaker 1: government could produce this declaration that says more or less
3:50
Speaker 1: what she suggested it needs to say, that the case
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Speaker 1: would be Candidly. I think that is a bit of
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Speaker 1: a stretched And if the government does produce the declaration
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Speaker 1: that says the weapon is a fund does not going
4:01
Speaker 1: forward in any way, shape or form unless the government
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Speaker 1: gives a reason as to why. The reason for that
4:07
Speaker 1: is that if these plaintiffs have standing, which she seemed
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Speaker 1: to assume, and her order proving mootness is an uphill
4:14
Speaker 1: battle for the government, they have to do more than
4:17
Speaker 1: just change their conduct. It's a settled matter of law.
4:20
Speaker 1: That's what we call the voluntary cessation doctrine that when
4:23
Speaker 1: one party voluntarily changes its conduct, that's not enough to
4:27
Speaker 1: get rid of a lawsuit as moot because they could
4:30
Speaker 1: typically change their conduct back. So a declaration that says
4:33
Speaker 1: we changed our conduct might not be good enough unless
4:36
Speaker 1: it explains why, it offers some sort.
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Speaker 2: Of commitment and just explain why this weaponization fund is
4:43
Speaker 2: considered illegal by most experts.
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Speaker 1: Well, there's a lot going on fund in the weaponization fund. Right,
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Speaker 1: So the lawsuit that it purported to settle was a
4:53
Speaker 1: lawsuit brought by Donald Trump, some of his family members
4:57
Speaker 1: and associates against the IRS for leaking his tax returns.
5:01
Speaker 1: And it also purported to settle to other matters which
5:04
Speaker 1: were pending as administrative claim So someone had gone to
5:08
Speaker 1: the agency and said, you wronged me. Those claims were
5:11
Speaker 1: brought by Donald Trump personally, I think, against the Justice Department,
5:14
Speaker 1: but against the US government for alleged misconducts related to
5:19
Speaker 1: the classified document's kids and related to the Russia investigation. Now,
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Speaker 1: those underlying administrative claims, first of all, are plainly meritless
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Speaker 1: near frivolous. I know less about the leak of the
5:30
Speaker 1: tax returns. It's possible there is some someting there. But
5:33
Speaker 1: what you don't do is settle a case, even if
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Speaker 1: it were of some marginal validity, you don't settle it
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Speaker 1: by signing over that huge amount of money to third parties.
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Speaker 1: The weaponization sign seemed like a fairly transparent attempt to
5:49
Speaker 1: reward the president's supporters, even if, in fact, because of
5:54
Speaker 1: their engagement in misconduct to the illegal activity.
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Speaker 2: And what he testified to Congress, Bland said that the
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Speaker 2: part of the agreement banning the government from ever prosecuting
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Speaker 2: any IRS claims against Trump, his family, or his businesses,
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Speaker 2: that part is still in place.
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Speaker 1: He did say that, And I find that particular document
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Speaker 1: to be a puzzle. It's not shocking. First, as an
6:21
Speaker 1: initial matter, it's not entirely clear to me that it
6:24
Speaker 1: is part of the settlement agreement. When DOJ announced the settlement,
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Speaker 1: agreement included the agreement itself and the Attorney General order
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Speaker 1: that creates the Weaponization Fund. Nothing in the agreement itself
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Speaker 1: mentions a waiver for Trump and his family of tax
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Speaker 1: returns or anything else. In fact, it only purports to
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Speaker 1: resolve the pending Trump lasses. But don't actually think that
6:48
Speaker 1: waiver document is legitimately considered part of the settlement because
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Speaker 1: it's not actually mentioned in the settlement itself, was published
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Speaker 1: as a separate document a day later, signed by someone else,
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Speaker 1: not signed by the Treasury Department. It is wildly inconsistent
7:03
Speaker 1: with certainly normal DOJ policy or practice in this area.
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Speaker 2: And is that waiver before judge you bring them on
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Speaker 2: in this case?
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Speaker 1: I don't think it does, because it was focused on
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Speaker 1: the Weaponization Fund and the creation of that fund, how
7:19
Speaker 1: it harms this particular group of plaintiffs. I don't think
7:23
Speaker 1: they asserted any claims related to the waiver language itself.
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Speaker 2: Yeah, it just seems like that's being ignored.
7:30
Speaker 1: And it's egregiously overbroad. Right, it's not just tax on
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Speaker 1: It says any matter currently pending or that could be
7:38
Speaker 1: brought by any federal agency, like it's some Trump grandchild
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Speaker 1: has a pending parking ticket from a national park ranger,
7:46
Speaker 1: like that is wiped out by this. I cannot imagine
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Speaker 1: that they followed any proper procedures or got consent from
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Speaker 1: the relevant agencies, or that such a settlement could ever
7:58
Speaker 1: be justified.
8:00
Speaker 4: You know.
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Speaker 2: Another judge, a DC federal judge Richard Leon last week,
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Speaker 2: denied a request for an order blocking the fund, saying
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Speaker 2: he wasn't persuaded that there was a live controversy based
8:14
Speaker 2: on the government's representations. But he also issued a warning
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Speaker 2: to the Justice Department during the proceedings quote, don't play
8:22
Speaker 2: possum with this court.
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Speaker 1: I don't necessarily agree with Judge Leanne's decision, but I
8:27
Speaker 1: imagine the skepticism you just quoted, you know, based on
8:30
Speaker 1: experience with the federal government recently in court cases, and
8:34
Speaker 1: also just based on the somewhat bizarre posture here where
8:38
Speaker 1: the government is insisting its moot but has refused to
8:40
Speaker 1: put in any competent evidence to show it.
8:43
Speaker 2: And also Miami judges responding to I don't know whether
8:47
Speaker 2: it was a letter or what from a group of
8:49
Speaker 2: federal judges saying that this was a fraud on the court.
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Speaker 1: Yes, that's fascinating. That is the original pace right that
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Speaker 1: was brought by the Trumps against the government. The Trump's
9:02
Speaker 1: dismissed it with prejudice. Upon reaching the settlement agreement with
9:07
Speaker 1: the federal government, the court dismissed it. Well, the court,
9:12
Speaker 1: I don't even know that she had an option at
9:13
Speaker 1: that point, but assumed the dismissal was valid. She was
9:17
Speaker 1: not asked to evaluate any settlement. But a group of
9:20
Speaker 1: federal judges filed I think they felt it as an
9:23
Speaker 1: amicust motion to reopen the chaise because the dismissal was
9:27
Speaker 1: part of a fraud and that the court was being
9:29
Speaker 1: used in perpetrating a fraud, which we are in uncharted
9:33
Speaker 1: territory here, reluctant to opine on the merits of the
9:38
Speaker 1: motion or what the court should do in the situation.
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Speaker 1: But I think what the court has done in reopening
9:43
Speaker 1: the case and asking for briefing is indicative. But she's
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Speaker 1: very troubled.
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Speaker 2: There are indications that people in the Trump administration are
9:52
Speaker 2: looking for other ways to compensate these people they claim
9:57
Speaker 2: were victimized, these people they claimed were victimized by the
10:01
Speaker 2: Biden administration. Lindsay Graham, Republican Senator Lindsay Graham, in a
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Speaker 2: social media post, backed the idea of pursuing payouts through
10:10
Speaker 2: the Federal Tort Claims Act, and then Stanley Woodward, the
10:15
Speaker 2: third top official at the Justice Department, responded with quote,
10:19
Speaker 2: we're working on it. That post was deleted, but that's
10:23
Speaker 2: another way for them to compensate these people.
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Speaker 5: Right, yes, that it.
10:27
Speaker 1: Clearly appears to be their strategy, and they've done it before.
10:30
Speaker 3: Right.
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Speaker 1: They made giant payouts under Federal Turte Claim Act and
10:34
Speaker 1: similarly styled cases Mike Flynn and Carter Page or Assumilar
10:39
Speaker 1: to others as well. Those were just the headline one,
10:41
Speaker 1: but people who clearly weren't entitled to any payout from
10:45
Speaker 1: the federal government under the Federal Tort Claims Act received
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Speaker 1: enormous payouts, and I assimilar imagining they can do something
10:52
Speaker 1: based on individualized administrative claim by others as well. It's
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Speaker 1: possible that the Weaponization Fund was an attempt to bypass
11:01
Speaker 1: the normal Department of Justice machinery that would have attorneys
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Speaker 1: look at and opine on such claims. It didn't stop
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Speaker 1: the payouts to Mike Flynn as far as I know,
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Speaker 1: so it is possible it will be a viable avenue
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Speaker 1: for them for other claim ups as well.
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Speaker 2: So you mentioned Michael Flynn and Carter Paige, the Justice
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Speaker 2: Department made separate one point twenty five million dollars settlements
11:25
Speaker 2: in two lawsuits they filed. Other agreements included four million
11:30
Speaker 2: to FBI employees who claimed political retaliation under Biden. The
11:35
Speaker 2: DOJ agreed to pay half a million dollars to cover
11:39
Speaker 2: the attorney fees of individuals who were part of a
11:43
Speaker 2: litigation accusing the Biden administration of unconstitutionally coercing social media
11:49
Speaker 2: platforms into taking down posts about the COVID pandemic and
11:54
Speaker 2: the twenty twenty election and amy. The Justice Department decides
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Speaker 2: itself whether to these off. There's no second opinion. There's
12:03
Speaker 2: no approval from a judge.
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Speaker 1: That's correct. That's how they work. And you know, the
12:09
Speaker 1: Justice Department has had in the past a pretty robust
12:12
Speaker 1: process for evaluating those The agency looks at some Department
12:16
Speaker 1: of Justice looks at them as all enshrined in regulation.
12:19
Speaker 1: If anything, they historically have been very protective of the
12:23
Speaker 1: taxpayer fisk. So even when somebody has a valid claim,
12:27
Speaker 1: frequently the Justice Department will push back against overpayments and
12:32
Speaker 1: evaluate the litigation risk. It's a pretty serious process, or
12:35
Speaker 1: has been historically. I don't know whether it's being bypassed
12:38
Speaker 1: or ignored or is just controlled by political official business
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Speaker 1: points idea.
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Speaker 2: It certainly seems like from the claims that have been granted,
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Speaker 2: there's a lot of politics involved in this. Thanks so
12:49
Speaker 2: much for joining me on the show.
12:50
Speaker 4: Amy.
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Speaker 2: That's Amy Powell Litigation Direct You're at Lawyers for Good Government.
12:58
Speaker 2: President Trump's approval or Nvidia to sell chips to some
13:02
Speaker 2: customers in China has potentially derailed a major AI smuggling prosecution.
13:08
Speaker 2: Nearing trial. Lawyers for one of the two businessmen indicted
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Speaker 2: for evading export control laws by transporting one hundred sixty
13:16
Speaker 2: million dollars in Vidia's powerful generative AI accelerating H one
13:22
Speaker 2: hundred and h two hundred. Processors have argued that further
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Speaker 2: information on Trump's deliberations with Nvidia and China may prove
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Speaker 2: their client's innocence. In an unusual decision, a Houston federal
13:35
Speaker 2: judge directed federal prosecutors to provide the defense with non
13:40
Speaker 2: public presidential materials reflecting Trump policies that relaxed restrictions on
13:46
Speaker 2: Invidia's shipments to China. Joining me is Bloomberg Law reporter
13:50
Speaker 2: Ben Penn. Ben start by telling us about this smuggling case.
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Speaker 4: Sure, there were two businessmen, one as a Canadian citizen
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Speaker 4: and other Chinese citist, and both operate companies on the
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Speaker 4: East Coast who were indicted last December for violating export
14:09
Speaker 4: control and smuggling laws for transporting about one hundred and
14:13
Speaker 4: sixty million dollars worth of Navidia produced AI chips to China,
14:19
Speaker 4: and a case that senior officials in the Justice Department
14:23
Speaker 4: had promoted last December as a primary example of this
14:27
Speaker 4: administration's commitment to protecting US technological innovation from foreign adversaries.
14:34
Speaker 4: And then, within a few hours after that case was
14:37
Speaker 4: first announced last on December eighth, Trump took to truth
14:41
Speaker 4: social and announced that he had reached a deal with
14:44
Speaker 4: China to permit the distribution of some of those same
14:49
Speaker 4: advanced chips, the H two hundred processors into China. So
14:56
Speaker 4: that caused some instant problems for the case. And then
14:59
Speaker 4: were recent developments have further complicated.
15:02
Speaker 2: Trump's announcement come after the alleged smuggling. So how is
15:07
Speaker 2: this a problem for the case?
15:09
Speaker 4: Well, that's the point that the government has tried to
15:11
Speaker 4: point out in arguing that the president's policy pronouncements don't
15:17
Speaker 4: have bearing on the evidence that they have assembled and
15:21
Speaker 4: they issue there. According to the defense lawyers is that
15:25
Speaker 4: there's basically been an ongoing dialogue between the US, Nvidia, China,
15:31
Speaker 4: other various cabinet officials, departments involved, including the Commresce Department,
15:36
Speaker 4: and a lot of this has all been behind closed doors.
15:39
Speaker 4: These conversations began throughout twenty twenty five and overlapping with
15:44
Speaker 4: the time period in which the businessmen are which their
15:49
Speaker 4: alleged scheme took place, So it could be argued in
15:52
Speaker 4: the defense lawyers have tried to argue that they need
15:54
Speaker 4: more disclosure as part of the prosecutors discovery obligations. They
15:59
Speaker 4: need disclosure of these internal deliberations that took place inside
16:05
Speaker 4: the White House China and Chinese officials in Nvidia in
16:10
Speaker 4: order to learn whether it's possible that the businessmen the
16:14
Speaker 4: dependants were not in fact flouting export control laws and
16:20
Speaker 4: were actually in compliance with what the President was contemplating.
16:23
Speaker 4: We'll see. I talk to lawyers who say that they
16:26
Speaker 4: think this argument is a stretch, but you know, it's
16:29
Speaker 4: pretty fascinating that in this case we have a judge
16:32
Speaker 4: who has agreed and ordered the government to produce discovery
16:36
Speaker 4: on these unpublished White House communications, which is really rare.
16:40
Speaker 4: The government is not going to easily hand over that information,
16:44
Speaker 4: and they've already fund up the motion to reconsider. And
16:47
Speaker 4: if the judge doesn't whether it's course, then we can
16:50
Speaker 4: expect that to be appealed. But what might come into
16:54
Speaker 4: play here is if the judges order for the government
16:57
Speaker 4: to produce discovery of those White House deliberations is upheld,
17:02
Speaker 4: then the Justice Department they have to make a decision
17:05
Speaker 4: of do we dismiss this case rather than produce what
17:09
Speaker 4: they would argue our privileged communications.
17:12
Speaker 2: How unusual is it for a judge to order, you know,
17:16
Speaker 2: internal White House communications to be turned over to a
17:19
Speaker 2: defense team very unusual.
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Speaker 4: And what's interesting here is that the judge didn't actually
17:25
Speaker 4: use as his reasoning what the defense had argued, which
17:28
Speaker 4: was that this Justice Department is so tightly under the
17:34
Speaker 4: control of this President Trump, who has been opened his
17:38
Speaker 4: administration has been open about their view of the White House,
17:42
Speaker 4: you know, controlling the ins and outs of Justice Department
17:45
Speaker 4: charging decisions, therefore making the White House communications subject to discovery.
17:53
Speaker 4: This is an argument that it would not surprise me
17:55
Speaker 4: if more defense letters try to bring that argument as
17:59
Speaker 4: we continue to the Justice Department moving at the direction
18:02
Speaker 4: of the President in some of their investigations of the
18:06
Speaker 4: president's perceived enemies. But in this case, the judge didn't
18:10
Speaker 4: even mention anything specific to Trump's behavior as his reasoning
18:16
Speaker 4: for granting the order. He said that this could apply
18:19
Speaker 4: to any president in any Justice Department, which he said,
18:22
Speaker 4: irrespective of the relationship between President Trump and DJA, that
18:28
Speaker 4: the president is in any administration is effectively an extension
18:32
Speaker 4: of the prosecution team. And that's something that is certainly
18:36
Speaker 4: going to be a challenge if the judge doesn't agree
18:39
Speaker 4: to the motion for reconsideration. We'll see that appeal to
18:43
Speaker 4: the Fifth Circuit. I have no doubt. But what's interesting
18:47
Speaker 4: here to me is that, you know, if this is
18:49
Speaker 4: a type of argument that the defense lawyers have success
18:53
Speaker 4: in here, even though the judge wasn't quite agreeing to
18:56
Speaker 4: their reasoning. We'll see defendants in other cases try to
18:59
Speaker 4: argue the specific relationship between this DOJ and White House
19:03
Speaker 4: makes internal White House communications more subject to discovery.
19:08
Speaker 2: Is the trial still on at this point.
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Speaker 4: No, it was supposed to start this morning in Houston,
19:14
Speaker 4: and there hasn't been adocuted order yet, but the trial
19:17
Speaker 4: didn't begin today. An employee of the court and the
19:20
Speaker 4: judges chambers told me that there would be a motion
19:23
Speaker 4: that will be filed maybe by the end of today
19:26
Speaker 4: that will reschedule the trial. That the government had asked
19:29
Speaker 4: for our continuance and it's been granted.
19:32
Speaker 2: Would this have been known if Trump hadn't sent out
19:34
Speaker 2: that truth social post.
19:37
Speaker 4: Yeah, that's a good question. I think. I'm not a
19:39
Speaker 4: tech reporter, but I do believe that there had been
19:42
Speaker 4: public reporting about various Trump Navidia China talks Throughout the
19:49
Speaker 4: past year. There have been public disclosures in various forms
19:54
Speaker 4: of this policy change, but it's kind of ambiguous as
19:59
Speaker 4: to exactly how that's being carried out.
20:01
Speaker 2: When or if the case goes to trial. What complications
20:06
Speaker 2: could dispose for prosecutors.
20:08
Speaker 4: If this case ever does go to trial, the prosecutors
20:11
Speaker 4: are going to have to contend with the sort of
20:14
Speaker 4: mixed messaging that Trump's policy change to permit sales of
20:20
Speaker 4: the Naividia chips into China will create for their prosecution,
20:23
Speaker 4: because now they're going to have to you know, even
20:26
Speaker 4: if technically the conduct was illegal at the time, was
20:30
Speaker 4: committed before Trump had come up with the new announced
20:33
Speaker 4: the new policy, it's still the issue of, well, why
20:36
Speaker 4: are we devoting government resources to conduct that under current
20:41
Speaker 4: policy appears to be legal, And that's something that the
20:44
Speaker 4: prosecutors may take measures to address, and then maybe something
20:49
Speaker 4: that skeptical jurors could be weighing on them as they
20:51
Speaker 4: are considering whether to agree with the government's position.
20:55
Speaker 2: So the next thing is we'll see if the judge
20:58
Speaker 2: grants the motion for reconsideringation or the government likely appeals
21:02
Speaker 2: to the Fifth Circuit. Thanks so much, Ben, that's Bloomberg
21:06
Speaker 2: Law reporter Ben Penn Turning now to other legal news
21:10
Speaker 2: and a case we haven't heard about for quite some time.
21:15
Speaker 2: FTX co founder Sam Bank bin Fried lost his bid
21:19
Speaker 2: to overturn his fraud conviction and his twenty five year
21:22
Speaker 2: prison sentence. A federal appeals court rejected his claims of
21:26
Speaker 2: not receiving a fair trial and declined to throw out
21:30
Speaker 2: the twenty twenty three guilty verdict. That the one time
21:34
Speaker 2: cryptocurrency mobil argued was tainted by improper evidentiary rulings and
21:40
Speaker 2: a biased judge. Joining me is Bloomberg Legal reporter Ava
21:44
Speaker 2: Benny Morrison, who covered the trial, Ava remind us what
21:48
Speaker 2: SBF was convicted of.
21:50
Speaker 5: Sam Bankminfrid was convicted of fraud and sentenced to twenty
21:54
Speaker 5: five years in prison for flying to investors, companies, and
21:59
Speaker 5: lenders and essentially defrauding them out of billions of dollars
22:04
Speaker 5: at his cryptocurrency company FTX.
22:07
Speaker 2: Let's talk about some of the points on his appeal.
22:11
Speaker 2: One that the judge prevented SBF from introducing evidence that
22:17
Speaker 2: FTX had enough money to cover customer withdrawals.
22:21
Speaker 5: Yes, that was one of the main points in Sam
22:24
Speaker 5: Bateman's Reed's appeal. He wanted to introduce evidence that STX
22:29
Speaker 5: was actually solvent and if given the time that he
22:32
Speaker 5: would have been able to pay back customers every single dollar.
22:36
Speaker 5: He wanted to talk about the bankruptcy process and really
22:41
Speaker 5: zero in on that fact. He said that the judge
22:43
Speaker 5: wouldn't allow him, and it essentially led to some being
22:47
Speaker 5: put on the scale and he couldn't mount a proper defense.
22:50
Speaker 2: And what did the appeals courts say to that?
22:52
Speaker 5: The appeals court threw that out and said that he
22:56
Speaker 5: had ample opportunity to talk about some of the liquidity
23:00
Speaker 5: hughes with STX and Alameda.
23:03
Speaker 2: I remember during the trial talking to you about the
23:05
Speaker 2: fact that Judge Caplan had Sam Bankman freed testify outside
23:10
Speaker 2: the jury's presence before he testified before the jury, which
23:13
Speaker 2: is really odd.
23:15
Speaker 5: Yeah, that was one of the other key points in
23:18
Speaker 5: Sam's appeal that he had to go through this kind
23:22
Speaker 5: of deposition outside the presence of the jury, but in
23:25
Speaker 5: front of the prosecution. So he said that he was
23:28
Speaker 5: essentially previewing his defense to the other side. He also
23:33
Speaker 5: said that Judge Caplan wouldn't let him out a advice
23:37
Speaker 5: of council defense. He wanted to talk about how he
23:40
Speaker 5: relied on an army of lawyers and other professionals before
23:45
Speaker 5: he made decisions about moving money around and loans to
23:49
Speaker 5: other executives, but the judge ror that he couldn't do that,
23:53
Speaker 5: and this was all part of why the trial was
23:57
Speaker 5: unfair to him.
23:58
Speaker 2: And SBF lawyers said the judge continually ridiculed their client
24:04
Speaker 2: and pressured jurors into a quick verdict on the first
24:07
Speaker 2: day of deliberations.
24:09
Speaker 5: Yeah, so this just a little bit of an unusual point.
24:12
Speaker 5: Sam tried to point to the fact that the judge
24:15
Speaker 5: offering to provide pizza and din into the jury and
24:19
Speaker 5: have them stay longer than nine to five was all
24:22
Speaker 5: part of a pressure tactic to get them to reach
24:26
Speaker 5: a verdict as soon as possible. But that's not entirely
24:29
Speaker 5: unusual to see juries kind of sequestered or stay past
24:35
Speaker 5: their five pm deadline to try and reach a verdict.
24:39
Speaker 2: And how did the appellate court respond to these other allegations.
24:44
Speaker 5: They said that even though he had to go through
24:48
Speaker 5: this kind of deposition before the jury came in and
24:53
Speaker 5: that there were these rulings against him and what he
24:56
Speaker 5: was permitted to talk about, the appeals Court found that
24:59
Speaker 5: he was able to present his version of events to
25:02
Speaker 5: the jury when he testified regarding his good faith beliefs,
25:05
Speaker 5: the Alamed's assets were greater than of liabilities. So the
25:09
Speaker 5: court found that he was still able to present a
25:12
Speaker 5: sufficient case.
25:14
Speaker 2: And we haven't talked yet about the money that he
25:16
Speaker 2: was ordered to pay. Is that still in place?
25:20
Speaker 5: Yeah, that's right. So he was ordered to repay eleven
25:23
Speaker 5: billion dollars, which is an extraordinary number, and he had
25:27
Speaker 5: argued in his appeal, but it meant that statements Fred's
25:31
Speaker 5: ability to earn a livelihood ever again was very slim,
25:36
Speaker 5: and I give that it was unconstitutional, but the court
25:39
Speaker 5: found that even if he will never be able to
25:43
Speaker 5: unfold to satisfy on the eleven billion just golo judgment, it
25:46
Speaker 5: did not render the forfeiture unconstitutional or grossly disproportionate.
25:51
Speaker 2: With the bankruptcy and stuff, are the customers going to
25:55
Speaker 2: be refunded most of the money.
25:57
Speaker 5: I think the bankruptcy process has been large, really successful
26:01
Speaker 5: for most of the STX customers, A lot of them,
26:04
Speaker 5: if not all of them, have got their money back,
26:08
Speaker 5: if not all of their investment, then very close to
26:11
Speaker 5: But the argument that they make is that they could
26:13
Speaker 5: have held on to some of these investments and could
26:16
Speaker 5: have got some of the high returns that we've seen
26:19
Speaker 5: over the past a year or so that the other
26:22
Speaker 5: investors have had in the crypto market.
26:24
Speaker 2: Specifically, the Appellate Court said the government's evidence against him
26:29
Speaker 2: was conservatively stated robust, so remind us about the main
26:34
Speaker 2: prosecution witnesses against him.
26:37
Speaker 5: The prosecution's case was bolstered by the testimony from a
26:41
Speaker 5: few key witnesses, including the co founder of FTX, Gary Wong,
26:46
Speaker 5: and the former CEO of Elementar Research, Caroline Ellison. They
26:50
Speaker 5: were the star witnesses for the government and they explained
26:53
Speaker 5: how Sam would move money around and how he knew
26:58
Speaker 5: that he was using customer funds or other investments than
27:01
Speaker 5: to purchase real estate and he knew that was wrong,
27:05
Speaker 5: and that evidence really helped convict Stam. In the end,
27:09
Speaker 5: have they.
27:09
Speaker 2: Said what they're going to do. They could appeal to
27:11
Speaker 2: the full Circuit, or they could try a Supreme Court appeal.
27:14
Speaker 5: Exactly, he could try a Supreme Court appeal. We haven't
27:17
Speaker 5: heard yet from his legal pain about what he's going
27:21
Speaker 5: to do next, though he has submitted an application for
27:25
Speaker 5: a pardon. He has been mounting a bit of a
27:28
Speaker 5: social media campaign even though he's in prison, appealing to
27:32
Speaker 5: President Trump and appearing on conservative news platforms, trying to
27:36
Speaker 5: really dig up his Republican bona fide. And we reported
27:40
Speaker 5: last week that he had submitted a formal application to
27:43
Speaker 5: the Justice Department for a pardon.
27:45
Speaker 2: It's great to talk to you again, Eva, Welcome back
27:48
Speaker 2: from maternity leave. That's Bloomberg Legal reporter Ava Benny Morrison,
27:53
Speaker 2: and that's it for this edition of The Bloomberg Law Show.
27:55
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