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Speaker 1: You're listening to Bloomberg Law with June Grosso from Bloomberg Radio.

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Speaker 1: I couldn't agree more with President Biden.

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Speaker 2: US Steel should remain American owned, an American operator. It

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Speaker 2: was no coincidence that, in a campaign blitz on Labor Day,

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Speaker 2: Vice President Kamala Harris, courting union voters in the crucial

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Speaker 2: battleground state of Pennsylvania, where US Steal is headquartered, announced

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Speaker 2: her opposition to Nippon Steele's fourteen point one billion dollar

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Speaker 2: takeover of the iconic American company, a deal that the

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Speaker 2: United Steelworkers' Union also opposes. The proposed deal has been

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Speaker 2: subject to a review by the Secretive Committee on Foreign

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Speaker 2: Investment in the United States, or SYPHIUS, and President Biden

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Speaker 2: plans to kill the deal as soon as Syphius formally

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Speaker 2: recommends it be scrapped, according to Bloomberg's sources. Of course,

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Speaker 2: Biden announced his opposition to the deal way back in

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Speaker 2: March without any scifious recommendation, an unusual move. Several business groups,

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Speaker 2: including the Chamber of Commerce, sent a letter to Treasury

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Speaker 2: Secretary Janet Gellen today warning that the administration's national security

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Speaker 2: review of the deal is being unduly influenced by political pressures. Quote.

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Speaker 2: We feared that the Scifius process is being used to

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Speaker 2: further political agendas that are outside the committee's purview, and

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Speaker 2: both companies have suggested they could challenge Biden's decision in court.

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Speaker 2: Joining me is Rick Sofield, a partner at Debauvois and

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Speaker 2: Plimpton who was formerly the Justice Department. Scythia's representative, so

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Speaker 2: tell us about Scyphius and how it operates.

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Speaker 1: SIPPIUS is the Committee on Foreign Investment in the United States,

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Speaker 1: which is an interagency body made up of representatives from

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Speaker 1: various US federal government agencies. It includes agencies such as

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Speaker 1: the Department of Treasury, the Department of Defense, the Department

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Speaker 1: of Justice, the Department of State, the Department of Homeland Security,

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Speaker 1: and others. The chair of the committee is the Department

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Speaker 1: of Treasury, so they host the meetings. Their job is

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Speaker 1: to work with the rest of the committee to come

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Speaker 1: to consensus on how to address national security concerns arising

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Speaker 1: from foreign investment into US businesses.

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Speaker 2: So when they make a decision, it's sort of an

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Speaker 2: interagency decision.

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Speaker 1: That's right, No single agency at on its own. The

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Speaker 1: various members of the committee discuss potential outcomes and work

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Speaker 1: together to come to the best possible resolution for a

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Speaker 1: given transaction. The idea is, rather than have a single

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Speaker 1: agency or a single individual making these important decisions, the

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Speaker 1: government puts different people in the room from different backgrounds,

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Speaker 1: with different institutional instersts, with different types of expertise, so

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Speaker 1: that the committee is able to get a broad view

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Speaker 1: from throughout the government as to how to address concerns.

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Speaker 2: Now, in March, President Biden publicly said he opposed the

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Speaker 2: sale of US steel to a foreign company before a

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Speaker 2: final Siphius decision. Is that unusual?

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Speaker 1: That's very unusual to my knowledge. President Biden's statement was

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Speaker 1: made even before a filing had been made with Syphius,

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Speaker 1: and that's not how the process ordinarily works. Ordinarily, a

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Speaker 1: filing gets made to the committee by the parties. They

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Speaker 1: usually do that together, and Sophius evaluates the transaction using

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Speaker 1: what it calls a risk based analysis. And that risk

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Speaker 1: based analysis looks at the threat posed by the foreignvestm,

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Speaker 1: the vulnerability of the US business, and the consequences if

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Speaker 1: the threat actor were to take advantage of vulnerable US business.

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Speaker 1: And so looking at the threat, vulnerability and consequences altogether,

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Speaker 1: Syphius comes up with its overall risk assessment and bases

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Speaker 1: its recommendation to the president on that risk assessment. So

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Speaker 1: back in March, to my knowledge, Cifius would not have

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Speaker 1: completed a risk analysis, and so the President really wouldn't

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Speaker 1: have had the benefit of that insight from Siphius in

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Speaker 1: making his pronouncement. There there'd been no risk analysis, And

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Speaker 1: to me, frankly, you know that creates potential litigation risk

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Speaker 1: because parties to the Sifius process are entitled to due process,

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Speaker 1: and it's hard to see where there would be adequate

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Speaker 1: due process, which is to notice an opportunity to be heard,

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Speaker 1: meaningfully heard on an issue. How they could have had

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Speaker 1: due process if the President had already made it to

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Speaker 1: decision before the committee had done its work and done

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Speaker 1: its risk based analysis.

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Speaker 2: So now, as first reported by Reuters, Syphius sent a

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Speaker 2: letter to the companies in late August warning that the

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Speaker 2: transaction raises national security concerns that can't be mitigated by

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Speaker 2: asset sales or other measures. What can the companies do

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Speaker 2: to change Sophius's mind or allay their concerns?

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Speaker 1: So it sounds like what the company's got is what

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Speaker 1: Ifius colloquially calls a rawls letter or a due process letter.

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Speaker 1: This has become a pretty routine part of the Sipius

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Speaker 1: process over the last decade or so. And really that

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Speaker 1: letter the rationale Forcifius issuing a letter of that type

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Speaker 1: guns from litigation involving company called Rolls that was building

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Speaker 1: a wind farm in Oregon, and Syphius was concerned that

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Speaker 1: the wind farm could be used to house listening devices

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Speaker 1: that would spy on a naval training base near the

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Speaker 1: wind farm, and so Syphius moved to block that transaction.

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Speaker 1: The parties to that transaction suit and said that Sipius's

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Speaker 1: decision was not based on due process and actually invited

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Speaker 1: the court to review the president's determination. What the court

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Speaker 1: did there is it reaffirmed congresses mandate in the Sifius

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Speaker 1: Statute that courts should not stand in the shoes of

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Speaker 1: the president and do their own national security assessment. And

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Speaker 1: so the court didn't say that the president got the

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Speaker 1: national security decision wrong. Instead, what it did is it said, hey, Siphius,

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Speaker 1: you need to go back and check and make sure

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Speaker 1: that you gave the parties adequate due process. You gave

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Speaker 1: them all the information about what your concerns are and

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Speaker 1: gave them an opportunity to be hurt on those concerns

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Speaker 1: and to see if there could be some package of

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Speaker 1: mitigation measures that would alley the security concerns short of

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Speaker 1: a block. So that's what seems to be happening here

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Speaker 1: is CIFUS is now communicated specifically what its national security

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Speaker 1: concerns are. And I would assume what's happening now is

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Speaker 1: the companies are, now that they understand what the concerns are,

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Speaker 1: trying to convince the government that those concerns can be

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Speaker 1: addressed in some way short of the President blocking the transaction,

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Speaker 1: and that can involve providing written responses that can provide

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Speaker 1: include providing the opportunity for face to face meetings with

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Speaker 1: senior executives.

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Speaker 3: And the like.

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Speaker 1: And it's an opportunity now for the companies to try

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Speaker 1: to convince Cyphius that there's a way to address the concerns.

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Speaker 2: Nip On Steele sent a senior executive to Washington today

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Speaker 2: tom with senior US officials to boost its case for

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Speaker 2: the takeover of US Steel. According to Bloomberg sources, would

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Speaker 2: you call that a last ditch effort to save the

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Speaker 2: deal or just part of the process.

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Speaker 1: I mean, you know, Ciphius is already said they have concerns,

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Speaker 1: they don't think they can mitigate it, and so you know,

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Speaker 1: normally in the process that doesn't necessarily mean the decisions done,

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Speaker 1: but it's kind of hard to get them to change

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Speaker 1: their mind if they've gotten this far. So you know,

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Speaker 1: maybe you could call it a last ditch effort, but

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Speaker 1: it is part of the process, right where Cifius gives

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Speaker 1: a written description of the concerns and then the parties

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Speaker 1: have discussions to try to address it.

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Speaker 2: Talking about due process, a letter from Syphius apparently arrived

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Speaker 2: on August thirty first. The companies were only given until

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Speaker 2: September fourth to respond, and also the companies wrote to

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Speaker 2: the panel asking to withdraw their submission, and Sophius ignored

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Speaker 2: that are those indications that might go toward a lack

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Speaker 2: of due process.

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Speaker 1: They could Cities is usually pretty liberal about granting companies

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Speaker 1: an opportunity to withdraw a filing and to refile it,

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Speaker 1: to stretch the clock and continue discussions on whether a

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Speaker 1: patch of mitigation measures can be constructed that would be

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Speaker 1: adequate and appropriate to address the national security concerns. So

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Speaker 1: it is abnormal in my view for Cifius to not

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Speaker 1: allow the parties to withdraw. And that's especially true in

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Speaker 1: that transaction like this, where the deal hasn't been completed.

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Speaker 1: If we're in a situation where Syphius was reviewing a

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Speaker 1: transaction that had already occurred, then the national security harm

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Speaker 1: would be accruing every day, and Cyphius made choose to

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Speaker 1: act quickly in that case to stop the national security

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Speaker 1: harm from occurring. But here the transaction is not gone,

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Speaker 1: and so it's odd to me that Cyphius wouldn't give

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Speaker 1: the parties an opportunity to take the time to put

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Speaker 1: together some meaningful proposals on how to drastic governments or

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Speaker 1: risk concerns.

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Speaker 2: I'm not sure I really understand what the national security

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Speaker 2: concerns are, because US Steel has warned that if the

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Speaker 2: deal doesn't go through, it could put thousands of jobs

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Speaker 2: at risk and might force the company to relocate from Pittsburgh.

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Speaker 1: Well, first of all, I don't have the benefit of

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Speaker 1: seeing the record, you know that's been assembled by Sciphius,

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Speaker 1: and frankly, we never will have the benefit of seeing

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Speaker 1: the full record. That's in part because if this is

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Speaker 1: risk analysis, the threats, the vulnerabilities and the consequence that

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Speaker 1: is posed by the transaction includes inputs from the intelligence community,

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Speaker 1: and that goes towards the threat piece of that analysis.

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Speaker 1: That threat variable and the way the intelligence community defines

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Speaker 1: threat is the capability and intent of a foreign acquirer

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Speaker 1: to harm US national security interests through a proposed transaction.

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Speaker 1: And so what the intelligence community does. The National Intelligence

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Speaker 1: Council coordinates the entire community that includes the FBI, the CIA,

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Speaker 1: the NSA, the military intelligence agencies, the Department of Energies,

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Speaker 1: Intelligence Agency, and others. It coordinates all those intelligence agencies,

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Speaker 1: collects information from those various agencies, which includes very sensitive

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Speaker 1: classified information that would just not be in the public

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Speaker 1: regarding the foreign acquirer and potentially the transaction itself to

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Speaker 1: the extent there was collection involving the transaction, and so

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Speaker 1: all that information is put together by the National Intelligence

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Speaker 1: Council and a document called the National Security Threat Assessment

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Speaker 1: if it called it a NISTA for short. So that NIFTA,

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Speaker 1: a highly classified document, is an important part of the

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Speaker 1: record that the government is looking at and that would

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Speaker 1: be referred to the President as part of a risk

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Speaker 1: based analysis. So there may be something, you know, if

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Speaker 1: we want to give Siphius the benefit of the doubt here,

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Speaker 1: there may be something in that NESTA that indicates a

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Speaker 1: threat that we just don't know about it. I'm hard

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Speaker 1: pressed to think of what that could be without the

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Speaker 1: benefit of having seen that type of document and that

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Speaker 1: type of reporting. But to me, that could be the

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Speaker 1: type of thing that the government could be relying on

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Speaker 1: in determining that there is a national security risk here.

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Speaker 2: Coming up next on the Bloomberg Law Show, I'll continue

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Speaker 2: this conversation with Rick Sofield. If the companies decide to

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Speaker 2: sue Sciphius, does that open the committee up to problems?

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Speaker 2: I'm June Grosso. When you're listening to Bloomberg. Nippon Steele

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Speaker 2: sent a senior executive to Washington today to boost its

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Speaker 2: case for the fourteen point one billion dollar takeover of

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Speaker 2: US Steel. According to Bloomberg sources, the Japanese steelmaker's bid

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Speaker 2: to acquire its American counterpart is at risk of collapsing,

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Speaker 2: with President Joe Biden set to block the merger deal

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Speaker 2: as soon as recommendations from the Committee on Foreign Investment

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Speaker 2: in the United States land on his desk. Despite that,

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Speaker 2: Japan's top government spokesman and ruling party leadership contender Yoshi Masahayashi,

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Speaker 2: expressed hope that the deal could go through in an

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Speaker 2: interview with Bloomberg last week.

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Speaker 3: It's still going on and that we don't know that

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Speaker 3: lis out yet, So we really hope that even in

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Speaker 3: this port Carrea, the both sides with a que who

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Speaker 3: is the mutual benefit and the more free flow of

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Speaker 3: the investment to each other.

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Speaker 2: US deal has vowed to pursue all possible options under

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Speaker 2: the law to ensure that the sale is completed. I've

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Speaker 2: been talking to Rick Sofield apart nor a deb of

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Speaker 2: was in Plimpton, who was formerly the Justice Department sifious

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Speaker 2: representative and participated in the review of more than a

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Speaker 2: thousand transactions. If the companies decide to challenge this in court,

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Speaker 2: what are the risks to scifious in a proceeding like

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Speaker 2: that With the elimination of the Chevron doctrine play a part.

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Speaker 1: So this is a really interesting question. You know, Firstly,

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Speaker 1: the Rawls case it kind of gave a guideline of

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Speaker 1: how the court might think about due process, and so

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Speaker 1: I think certainly here there could be some due process arguments,

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Speaker 1: particularly in light of the fact that you know, the

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Speaker 1: President put his thumb on the scale back in March

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Speaker 1: before any record had been put together, and so I

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Speaker 1: think that can really call into question whether or not

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Speaker 1: there has been due process here. The decision might have

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Speaker 1: been made before the transaction was even filed with the

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Speaker 1: Scifius Committee, and so I think that can put the

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Speaker 1: government in a very difficult position if due process arguments

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Speaker 1: are raised in the courts now on the issue of

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Speaker 1: what effect the overturning of Chevron deference might have. I

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Speaker 1: do think this is a tougher argument, but maybe not

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Speaker 1: an impossible one in today's environment. And that is, you know,

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Speaker 1: Congress has said that the courts should not put themselves

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Speaker 1: in the president's shoes and assess national security risk on

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Speaker 1: their row, that the courts should defer to the president's

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Speaker 1: authority in this space, and deference to the executive branch

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Speaker 1: to the president on national security matters. It's a long

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Speaker 1: standing president it's a long standing deference, and it's for

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Speaker 1: good reason. Right the president has the benefit of inputs

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Speaker 1: from the intelligence community that the courts just don't have,

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Speaker 1: and so to kind of attack that long standing deference.

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Speaker 1: I think that's an uphill battle. That said, though, you know,

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Speaker 1: we have this trend that we're seeing in the courts

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Speaker 1: away from giving deference, and so that could at the

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Speaker 1: court's thinking here, particularly if we're in a circumstance where

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Speaker 1: there's a really weak administrative record, where there are significant

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Speaker 1: due process concerns, that could invite the court to go

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Speaker 1: further than just pointing to due process fouls and to

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Speaker 1: potentially somehow put guardrails around or curb the president's supreme

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Speaker 1: authority to make national security determinations through the scifist process.

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Speaker 2: That would be a first then right, absolutely be a first.

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Speaker 1: But you know, there's a saying in legal circles that

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Speaker 1: you've probably heard, which is bad facts make bad laws.

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Speaker 1: If you've got bad facts, you've got a bad written record.

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Speaker 1: You've got a record of sort of the decision maker

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Speaker 1: making a decision months before the matter has even been

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Speaker 1: put before him. And then you know, the supporting documentation

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Speaker 1: is not convincing that the parties are not given an

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Speaker 1: adequate time to prepare responses to the government's written concerns.

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Speaker 1: And you have all these factors pointing to perhaps a

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Speaker 1: precipitous decision by the government. You could be inviting the

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Speaker 1: courts to take aggressive action, and so, yes, I think

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Speaker 1: it would be novel for sure, and I think it

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Speaker 1: would be a hard argument to make and win to

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Speaker 1: challenge the president's national security determination. But I give the

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Speaker 1: court a bad enough record, they just might do it.

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Speaker 2: There's something else I'm curious about. So nip On Steel

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Speaker 2: and US Steel have engaged in a nearly year long

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Speaker 2: attempt to win the support of the United steel Workers,

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Speaker 2: and today on a website Best Deal for American Steel

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Speaker 2: dot Com, the two companies made their correspondence with the

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Speaker 2: steel workers public in an effort to show how union

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Speaker 2: leaders snubbed their efforts to negotiate an agreement. And the

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Speaker 2: documents show, for example, that there were promises of no

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Speaker 2: layoffs or plant idling or permanent closures, et cetera, et cetera,

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Speaker 2: but the union remained firmly against it. And I'm wondering

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Speaker 2: if it's unusual for companies to be dealing directly with

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Speaker 2: the union like this before the deal is even finalized,

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Speaker 2: or is that par for the course.

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Speaker 1: So, I mean, what is par for the course is

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Speaker 1: for the parties to a transaction to work with other

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Speaker 1: interested parties to identify potential national security concerns and to

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Speaker 1: craft mitigation measures designed to address them. The idea here

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Speaker 1: would be that the parties want to get out in

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Speaker 1: front of these concerns and when they file with the

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Speaker 1: government and when they are engaged in this back and

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Speaker 1: forth with the government. Where we are now, where the

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Speaker 1: government has identified national security concerns, company doesn't necessarily want

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Speaker 1: to be reactive. They want to have gotten their ducks

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Speaker 1: in a row to be able to make the arguments

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Speaker 1: to the government that their national security concerns can be addressed. So,

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Speaker 1: you know, I can't say that I've seen it where

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Speaker 1: there's been sort of discussions with a union and acquiescence

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Speaker 1: from a union in order to get government approval. But

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Speaker 1: to have other stakeholders who are involved and on board

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Speaker 1: with a package of mitigation measures. That's consistent, right, That's

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Speaker 1: with normal practice. Companies do this all the time, and

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Speaker 1: it's part of just good management of vacifious process to

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Speaker 1: have your ducts in a row and to be prepared

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Speaker 1: to address any concerns that the government might raise.

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Speaker 2: Let's say that companies do challenge it in court, how

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Speaker 2: long would it take do you think to play out

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Speaker 2: months longer than months.

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Speaker 1: It can take months or years. There's no certainty, you know,

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Speaker 1: when you get to this litigation state, and so it's

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Speaker 1: really hard to say how long a litigation process would

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Speaker 1: take the play out.

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Speaker 2: And it's looking like litigation is the only possible answer

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Speaker 2: for Nippon and US steal, especially since former President Donald

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Speaker 2: Trump has also expressed opposition to the deal. So no

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Speaker 2: matter who wins the election, the next president will oppose

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Speaker 2: the deal. Thanks so much for joining me, Rick, that's

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Speaker 2: Rick Sofield, a partner Debevoise and Plimpton. Coming up next

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Speaker 2: on the Bloomberg Law Show. Sam bankman Fried's former girlfriend

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Speaker 2: and the government's star witness against him, is asking a

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Speaker 2: judge not to give her any jail time when she's

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Speaker 2: sentenced this month. I'm June Grosso and you're listening to Bloomberg.

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Speaker 2: Caroline Ellison was the star witness in the government's fraud

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Speaker 2: case against her former boyfriend, the one time crypto wonder boy,

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Speaker 2: Sam bankman Fried, and now she wants a get out

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Speaker 2: of jail free card. The former Alameda Research Chief executive

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Speaker 2: officer is pointing to her quote extraordinarily impactful cooperation in

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Speaker 2: one of the country's biggest financial crime investigations to convince

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Speaker 2: a judge to spare her from spending even a single

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Speaker 2: day in prison. In a sentencing memo late Tuesday, Ellison's

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Speaker 2: lawyers portrayed her as a talented woman caught under SBF

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Speaker 2: spell as his on again, off again girlfriend who wound

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Speaker 2: up helping him commit crimes. Quote. She regrets her role

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Speaker 2: deeply and will carry shame and remorse to her grave.

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Speaker 2: Joining me is Ava Benny Morrison, who covered the trial

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Speaker 2: and has looked at this one hundred and fifty page

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Speaker 2: sentencing memo. Ellison is trying to get away with no

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Speaker 2: jail time at all. Tell us what argument she's using.

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Speaker 4: Caroline Ellison filed a sentencing memo in court, essentially putting

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Speaker 4: her case board for the judge to spare her from

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Speaker 4: serving any prison time. She says that she was in

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Speaker 4: a pretty unique and complicated situation with sex founder Sam

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Speaker 4: Bankment Freed. They were in an on again, off again

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Speaker 4: relationship and he was manipulative, very hot and cold with her,

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Speaker 4: and she felt like she was forced into a position

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Speaker 4: to help him with his crimes and she couldn't leave.

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Speaker 4: She's asked the judge to take that into consideration, but

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Speaker 4: most importantly taken to consideration the fact that she was

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Speaker 4: the star witness of the government in its case against

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Speaker 4: the Sambaateman breeds. As soon as STX collapsed in late

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Speaker 4: twenty twenty two, she went back to the US. She

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Speaker 4: met with several prosecutors and regulators problem everything that they

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Speaker 4: wanted to know, even pointing them times that were committed

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Speaker 4: by Sam Bakman Breed that they didn't know about. She's

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Speaker 4: put all of these arguments forward just in a bit

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Speaker 4: to try and convince the judge to just sentence her

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Speaker 4: to supervis release memo.

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Speaker 2: A lot of time was spent on her on again,

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Speaker 2: off again relationship with Sam Bankman. Freed did that somehow

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Speaker 2: give her a pass?

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Speaker 4: It didn't form quite a central part of the senacinema,

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Speaker 4: which was more than one hundred and fifty pages, and

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Speaker 4: her lawyers went into pretty intimate details about what that

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Speaker 4: relationship was like mols, what she felt about Sam and

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Speaker 4: how he was treating her. She felt very isolated, she

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Speaker 4: felt manipulated by him. She was trying to balance a

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Speaker 4: romantic relationship and a professional relationship with the man who

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Speaker 4: was her boss. Her boys said in this document that

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Speaker 4: when she tried to leave Alameda, he would shower her

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Speaker 4: with professional compliments, tell her that he loved her and

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Speaker 4: that she was a key part of that operation and

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Speaker 4: it couldn't possibly go on without her. So she sort

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Speaker 4: of painted this picture of being stuck but at the

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Speaker 4: same time really losing her moral compass being Sam Bankman

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Speaker 4: Free to carry out his multi billion dollar Florida.

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Speaker 2: That's year talking about details in the memo. Did they

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Speaker 2: actually talk about her wanting to be invited to the

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Speaker 2: met Gala in twenty twenty two?

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Speaker 3: They did.

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Speaker 4: Actually, they gave some examples of some sick dynamics between

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Speaker 4: her and Sam Bankman Free. One example she gave was

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Speaker 4: when Sam was invited to the Met Gala in twenty

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Speaker 4: twenty two and Carolin was really excited about this, and

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Speaker 4: she asked if she could go with him, and he

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Speaker 4: said no and completely rebuffed her and said that he

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Speaker 4: didn't want to be seen out in public with her.

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Speaker 4: That's the version of events by her lawyers. They also

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Speaker 4: said that she he never invited her to any of

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Speaker 4: the kind of flashy crypto industry conferences that he would

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Speaker 4: go to, and really went to great lengths to keep

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Speaker 4: their relationship a secret.

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Speaker 2: It sounds more like a novel to me than a

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Speaker 2: sentencing memo. They also tried to distance her from this

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Speaker 2: slavish life style, you know, portrayed her as someone who

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Speaker 2: shopped at the gap and gave to charity and all

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Speaker 2: this stuff. I mean, how did they try to portray her.

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Speaker 2: She did make a lot of money, didn't.

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Speaker 4: She Well, she was paid a pretty decent salary, and

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Speaker 4: she said that she received bonuses, generous bonuses, in line

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Speaker 4: with a lot of the other executives at FTX and

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Speaker 4: Alimentar Research. But you're right, her lawyers really tried to

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Speaker 4: portray her as someone who was humble, who wasn't interested

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Speaker 4: in the finer things in life, just because she was

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Speaker 4: a wealthy human being. They gave little besprinkles, little anecdotes

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Speaker 4: throughout the sendencing memo from friends and family and former

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Speaker 4: colleagues saying, you know, Caroline muft to shop at the gap.

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Speaker 4: Her mum even mentioned that she had to buy her

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Speaker 4: shoes because she was so disinterested in buying anything for

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Speaker 4: herself when people couldn't even afford to eat around the world.

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Speaker 4: So they really tried to distance her from some of

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Speaker 4: the more extravagant and lavish elements that are associated with

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Speaker 4: the crypto industry.

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Speaker 2: They said that she's continued to suffer even after the

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Speaker 2: trial house.

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Speaker 4: So Caroline's boys have said that she was subject to intense,

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Speaker 4: intense public scrutiny, that trolls online speculater about her whereabouts.

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Speaker 4: When she went outside, she had to disguise herself, that

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Speaker 4: she was pursued really heavily by the media. And they

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Speaker 4: say that she has suffered more than other people that

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Speaker 4: were employed at Sex and Alimeter, and this should be

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Speaker 4: taken into account.

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Speaker 2: She's been rendered effectively unemployable in the near term, according

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Speaker 2: to the memo, And they also mentioned that she has

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Speaker 2: a new boyfriend now she does, she has a.

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Speaker 4: New partner, and her boys had asked to judge the

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Speaker 4: permission to redact some of the more personal details in

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Speaker 4: this centering memo relating to where she's living now and

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Speaker 4: her partner to kind of protect her from that ongoing

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Speaker 4: public attention. But yeah, she is working but as a volunteer,

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Speaker 4: and her lawyers said that she's also chipping away on

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Speaker 4: a couple of writing projects, fiction and even a mass textbook.

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Speaker 2: I was surprised. The Probation Department recommended she served three

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Speaker 2: years of supervised release, but no prison time.

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Speaker 4: Yes, the Probation Department said that she should be spared

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Speaker 4: any prison time. And look, it's not that unusual for

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Speaker 4: cooperating witnesses to be spared from prison or serve a

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Speaker 4: very very short sentence in a case like this. Caroline Ellison,

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Speaker 4: along with two other former FDF executives, were really key

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Speaker 4: to the government's case. They all turned up and testified

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Speaker 4: against them. They've been freed at his trial in late

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Speaker 4: twenty twenty three, which eventually led to his conviction and

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Speaker 4: his prison term of twenty five years. So it'll be

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Speaker 4: interesting to see what Judge Caplan does here and how

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00:27:53,359 --> 00:27:57,560
Speaker 4: he weighs up the value of Caroline's corporation and whether

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00:27:57,560 --> 00:28:00,680
Speaker 4: he finds that she should in fact spend at least

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00:28:00,680 --> 00:28:02,639
Speaker 4: a short period of time behind bars.

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00:28:03,320 --> 00:28:06,760
Speaker 2: And federal prosecutors haven't said yet what they'll ask for.

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00:28:07,800 --> 00:28:10,359
Speaker 4: No, we expect to hear from them in the next

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00:28:10,480 --> 00:28:12,920
Speaker 4: week or so, and they will put up their own

443
00:28:12,960 --> 00:28:16,879
Speaker 4: recommendation for what they think would be an adequate punishment

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00:28:17,119 --> 00:28:21,240
Speaker 4: for Caroline. They could side with the Probation Department and say, yes,

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00:28:21,320 --> 00:28:23,359
Speaker 4: we don't think that she should do any time because

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00:28:23,400 --> 00:28:26,400
Speaker 4: she was so so valuable for us, or they could

447
00:28:26,440 --> 00:28:31,119
Speaker 4: go outside of that and recommend some prison time. But

448
00:28:31,240 --> 00:28:34,840
Speaker 4: ultimately it comes down to the judge and he will

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00:28:34,840 --> 00:28:37,919
Speaker 4: make the termination as to what he thinks to Caroline.

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00:28:38,840 --> 00:28:43,560
Speaker 2: To cop and the former FTX Digital Market's co chief

451
00:28:44,040 --> 00:28:48,200
Speaker 2: who pled guilty but didn't cooperate, he was sentenced to

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00:28:48,280 --> 00:28:51,120
Speaker 2: seven and a half years in prison. I don't know

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00:28:51,120 --> 00:28:53,000
Speaker 2: if we can use that as an indication because he

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00:28:53,280 --> 00:28:57,800
Speaker 2: didn't cooperate, but seven and a half years is pretty substantial.

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00:28:58,600 --> 00:29:02,920
Speaker 4: Yes, absolutely, and was actually above the recommendation that the

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00:29:03,000 --> 00:29:06,719
Speaker 4: prosecutors had put forward and that the Probation Department had

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00:29:06,760 --> 00:29:09,360
Speaker 4: outlined as well. But Ryan Salin was a little bit

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00:29:09,400 --> 00:29:12,640
Speaker 4: of an outlier because he hadn't signed on to be

459
00:29:12,720 --> 00:29:16,680
Speaker 4: a corporating witness and testify gets them statement free a trial,

460
00:29:16,840 --> 00:29:19,760
Speaker 4: so he couldn't fall back on that and make that

461
00:29:19,800 --> 00:29:23,640
Speaker 4: same argument that Caroline is making in that he helped

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00:29:23,680 --> 00:29:25,880
Speaker 4: the government put their case together and he was a

463
00:29:25,920 --> 00:29:28,520
Speaker 4: key part of it. So I think that's part of

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00:29:28,520 --> 00:29:30,920
Speaker 4: the reason why he got such a big centers.

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Speaker 2: And that was Judge Kaplan, who sentenced him as well,

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Speaker 2: the same judge that's going to sentence Ellison.

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00:29:36,640 --> 00:29:37,160
Speaker 4: That's right.

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00:29:37,760 --> 00:29:40,960
Speaker 2: We will find out what he decides at her sentencing

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Speaker 2: on September twenty fourth. I know you'll be there, Ava,

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Speaker 2: Thanks so much. That's Bloomberg Legal Reporter Eva, Benny Morrison,

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Speaker 2: and that's it for this edition of The Bloomberg Law Show.

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00:29:51,760 --> 00:29:54,080
Speaker 2: Remember you can always get the latest legal news on

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00:29:54,160 --> 00:29:58,440
Speaker 2: our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,

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00:29:58,640 --> 00:30:03,680
Speaker 2: and at ww dot Bloomberg dot com, slash podcast slash Law,

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00:30:04,080 --> 00:30:06,640
Speaker 2: and remember to tune into The Bloomberg Law Show every

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00:30:06,720 --> 00:30:10,600
Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso

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00:30:10,760 --> 00:30:12,360
Speaker 2: and you're listening to Bloomberg