WEBVTT - SBF Cooperator Gets No Prison & New Crypto Strategy 0:00:03.200 --> 0:00:08.000 This is Bloomberg Law with June Brusso from Bloomberg Radio. 0:00:10.240 --> 0:00:14.280 He's the first person charged in the FTX collapse to 0:00:14.400 --> 0:00:19.600 avoid prison. Former FTX chief engineer Nishad Singh was one 0:00:19.640 --> 0:00:23.640 of three top executives who turned on Sam Bankman Freed 0:00:23.720 --> 0:00:28.440 and testified against him after his once thriving crypto empire 0:00:28.600 --> 0:00:32.239 imploded in twenty twenty two. Bankman Freed is serving a 0:00:32.320 --> 0:00:35.680 twenty five year prison sentence after a jury found him 0:00:35.720 --> 0:00:40.479 guilty of fraud last year. Alameda Research chief executive officer 0:00:40.560 --> 0:00:45.720 Caroline Ellison, the star witness against Bankman Freed, is reporting 0:00:45.760 --> 0:00:49.040 to prison in September to serve a two year sentence. 0:00:49.560 --> 0:00:53.640 Ryan Salome, one of Bankman Freed's top lieutenants at FTX 0:00:53.800 --> 0:00:57.240 who did not testify against him, is serving a seven 0:00:57.280 --> 0:01:00.560 and a half year sentence. But Singh walked out of 0:01:00.560 --> 0:01:04.280 the courtroom yesterday. A free man joining me is Bloomberg 0:01:04.360 --> 0:01:07.920 Legal reporter Ava Benny Morrison, who covered the trial and 0:01:08.120 --> 0:01:11.080 was at the sentencing, tell us a little about Singh. 0:01:11.480 --> 0:01:15.000 Mshad sing was one of three top executives at FTX 0:01:15.400 --> 0:01:18.000 who turned on Sam Banks and Freed and signed up 0:01:18.000 --> 0:01:21.840 his corporating witnesses to the government. They all testified at 0:01:21.959 --> 0:01:26.080 stmin Fred's broad trial and eventually helped land his conviction 0:01:26.200 --> 0:01:29.800 to statement. Freed's currently serving twenty five years in jail, 0:01:30.280 --> 0:01:33.160 and after his sentence, it was time for the corporators 0:01:33.160 --> 0:01:35.920 to face their own punishment for their role in the 0:01:35.959 --> 0:01:39.080 collapse and the years long thought at FTX. Now Mishad 0:01:39.160 --> 0:01:42.280 Singh turned up in court yesterday and we heard some 0:01:42.319 --> 0:01:46.880 pretty compelling arguments from his attorney about why he should 0:01:46.959 --> 0:01:50.240 avoid spending a day in prison. Only a couple of 0:01:50.240 --> 0:01:54.160 months ago, Caroline Elison, the former CEO of Alimenta Research, 0:01:54.840 --> 0:01:55.960 was sentenced to. 0:01:55.760 --> 0:01:56.880 Two years in jail. 0:01:57.280 --> 0:02:01.040 This is unusual most corporators end up avoiding any jail 0:02:01.120 --> 0:02:05.080 time whatsoever, but fortunately for Nishad scene that was what happened. 0:02:05.240 --> 0:02:08.959 Judge Lewis Caplan found that he deserved more cooperation credit 0:02:08.960 --> 0:02:12.040 than Caroline Ellison, and he was essentially less culpable than 0:02:12.040 --> 0:02:14.360 the florid at FTX than Allison was. 0:02:14.400 --> 0:02:17.240 It also that he was involved in the fraud for 0:02:17.680 --> 0:02:19.280 a shorter period of time. 0:02:19.720 --> 0:02:23.240 Judge Kaplan certainly seemed to focus on the amount of 0:02:23.280 --> 0:02:27.840 time Mishading knew about the fraud, so Nishad who was 0:02:27.919 --> 0:02:31.440 the chief engineer at FTX, only found out in September 0:02:31.919 --> 0:02:36.200 of twenty twenty two that FTX had been sending customer 0:02:36.280 --> 0:02:39.399 funds billions at dollars worth of customer fund to alimated research. 0:02:39.840 --> 0:02:43.640 In contrast, Caroline Ellison knew about this for years and 0:02:44.320 --> 0:02:48.200 was an accomplice to Sam Bankman. Fridge and Caplan found 0:02:48.240 --> 0:02:51.680 that this certainly helped Mishad Thing's case, the fact that 0:02:51.680 --> 0:02:53.240 he only knew about it for a couple of months 0:02:53.240 --> 0:02:56.280 before STX collapsed. You know, both the prosecution and the 0:02:56.280 --> 0:02:59.919 defense did admit even when Nishad Thing found out about this, 0:03:00.080 --> 0:03:03.200 max is broad and that STX couldn't afford to cover 0:03:03.240 --> 0:03:07.240 the whole customer deposits. He continued to allow campaign donations 0:03:07.240 --> 0:03:10.280 to be made in his name and forged ahead with 0:03:10.440 --> 0:03:15.000 a purchase of a beautiful house in Washington State, something 0:03:15.040 --> 0:03:17.639 that his lawyer said he will forever be ashamed of. 0:03:17.919 --> 0:03:20.120 Three point seven million dollar house. 0:03:20.840 --> 0:03:23.320 Yes, that's right, it was worth three point seven million 0:03:23.360 --> 0:03:25.959 dollars and he bought it with his friends with a 0:03:26.040 --> 0:03:28.120 place to go and when he could relax and go 0:03:28.160 --> 0:03:32.240 on holidays. This was kind of the only luxury. Maybe 0:03:32.440 --> 0:03:36.280 indulging purchase that Mishad seen had May when he was STX. 0:03:36.480 --> 0:03:38.840 His lawyers, you know, really stressed that he was a 0:03:38.880 --> 0:03:42.440 true believer in effect of altruism, his philosophy that drew 0:03:42.480 --> 0:03:45.400 a lot of the STX and LM research folks together, 0:03:45.600 --> 0:03:47.440 this idea that you could earn a lot of money 0:03:47.440 --> 0:03:49.280 and give most of your way to make the world 0:03:49.400 --> 0:03:52.600 better place. Mishad was very interested in charity. You know, 0:03:52.640 --> 0:03:55.840 he's been involved in given away a lot of concernings 0:03:55.960 --> 0:03:59.400 since he was in college. And his lawyers really tried 0:03:59.440 --> 0:04:02.280 to push that point that this was, you know, yeah, 0:04:02.320 --> 0:04:05.960 a big purchase, but it didn't look like he's and he's. 0:04:05.800 --> 0:04:08.240 Been working all this time, unlike Caroline Ellison. 0:04:08.640 --> 0:04:12.040 In Caroline Ellison's case, her lawyers have said that she 0:04:12.160 --> 0:04:17.919 was really struggling to find an employment after the SPX collapse, 0:04:18.400 --> 0:04:21.680 mainly because of the reputational damage that came is being 0:04:21.720 --> 0:04:27.080 associated with STX and Elemental Research. She had been working 0:04:27.080 --> 0:04:30.080 on writing a non fiction book and a math book 0:04:30.360 --> 0:04:34.839 that Mischadsen had been lucky enough to find a job. 0:04:34.960 --> 0:04:37.320 He's been working as a software engineer for a firm 0:04:37.360 --> 0:04:41.440 in California since FTX collapsed, and he's also been volunteering 0:04:41.520 --> 0:04:44.720 at a homeless shelter up from his house in the 0:04:44.760 --> 0:04:48.440 Bay Area, and at night he's working on code for 0:04:48.560 --> 0:04:52.839 a affordable housing project. So this certainly went towards his 0:04:53.279 --> 0:04:56.400 argument for someone that is trying to build his life 0:04:56.440 --> 0:05:00.240 back up again, and you know, he's certainly just any 0:05:00.320 --> 0:05:03.680 interest in getting involved in a multi billion dollar thought again. 0:05:04.040 --> 0:05:08.039 When he spoke to the judge, how did it come across. 0:05:08.080 --> 0:05:11.159 Something that struck me about Mishad in court yesterday was 0:05:11.200 --> 0:05:15.279 that he remained very calm and very composed the entire time. 0:05:15.680 --> 0:05:18.280 When he got up to speak to Judge Caplan, he 0:05:18.400 --> 0:05:21.080 approached the lectern with a piece of paper with his 0:05:21.120 --> 0:05:23.640 written words on it in his hand and said that 0:05:23.720 --> 0:05:27.400 how remorseful he was and how gutted he was about 0:05:27.520 --> 0:05:30.719 the harm that he caused to so many innocent people. 0:05:31.000 --> 0:05:33.800 He spoke about, you know, wanting to prove to not 0:05:33.880 --> 0:05:36.839 only the judge but others that he was on the 0:05:36.880 --> 0:05:40.240 past to redemption and he wanted to do good and 0:05:40.279 --> 0:05:42.520 be a force for good in the world since being 0:05:42.560 --> 0:05:45.400 part of the calamity at SS And what. 0:05:45.440 --> 0:05:48.479 Was the reaction when he learned that he wasn't going 0:05:48.520 --> 0:05:49.400 to have to go to prison. 0:05:49.839 --> 0:05:52.960 I think that the big question mark was whether Judge 0:05:53.040 --> 0:05:57.600 Caplan was going to send Mishad's prison or save him 0:05:57.640 --> 0:05:59.839 from that, especially after the two years Tent said he 0:05:59.839 --> 0:06:03.040 had the Caroline Elephent. So when he got to the 0:06:03.680 --> 0:06:06.960 pointy end of delivering his judgment, Mi Shad was standing 0:06:07.279 --> 0:06:11.440 between his two lawyers, and Judge Kaplin said I order 0:06:11.520 --> 0:06:14.320 you to report to the Attorney General of the United 0:06:14.360 --> 0:06:17.560 States the time served. And at that point Shad sing 0:06:17.600 --> 0:06:21.600 barely reacted. There was a very saint smile that came 0:06:21.640 --> 0:06:25.320 across his face. While his family, of which there were many, 0:06:25.720 --> 0:06:29.560 seated in the public gallery behind him, Augar his Beyonce 0:06:29.880 --> 0:06:33.040 Claire put her hand over her mouth. His mother kissed 0:06:33.040 --> 0:06:36.240 his Beyonce on the cheek, and they held hands and 0:06:36.560 --> 0:06:38.680 you could see that how emotional that they were. They 0:06:38.720 --> 0:06:41.320 were crying, but you could just sense the kind of 0:06:41.400 --> 0:06:43.480 utter relief that was put across the court room. 0:06:44.000 --> 0:06:47.599 What seemed a little unusual is that the judge addressed 0:06:47.839 --> 0:06:52.200 Thing's parents and said, I don't see anything you did wrong. 0:06:52.720 --> 0:06:53.680 Tell us what led to that. 0:06:54.440 --> 0:06:58.839 That's right part of things. Sentencing his parents along with 0:06:58.920 --> 0:07:01.760 his brother and other friends and former colleagues that FTX 0:07:01.920 --> 0:07:06.320 permitted letters in support of him, and his parents' letters 0:07:06.360 --> 0:07:10.480 were pretty heartbreaking. They spoke about raising their son as 0:07:10.480 --> 0:07:13.160 best as they could, spoke about how intelligent and talented 0:07:13.160 --> 0:07:15.720 he was, and then discovering that he had been caught 0:07:15.800 --> 0:07:18.239 up and export at FTX, And there were some pretty 0:07:18.280 --> 0:07:21.320 harrowing parts in there about the impact that the FTX 0:07:21.320 --> 0:07:23.440 collapse had had on the Shad and how he had 0:07:23.680 --> 0:07:27.440 contemplated suicide in the weeks and months after FTX. His 0:07:27.520 --> 0:07:30.680 parents spoke about the impact on his mental health, and 0:07:30.920 --> 0:07:34.200 the Shad lawyer actually made a point of saying, you know, 0:07:34.320 --> 0:07:37.480 every time Shad flew over from California to New York 0:07:37.520 --> 0:07:40.160 to meet with us at our offices, his father was 0:07:40.200 --> 0:07:42.440 there in the conference room sitting across from him, or 0:07:42.520 --> 0:07:45.360 his younger brother was there. So he had the unwavering 0:07:45.400 --> 0:07:48.440 support of his family. And that was very clear from 0:07:48.440 --> 0:07:50.600 the amount of people that turned up in the court yesterday. 0:07:50.920 --> 0:07:53.520 And the judge addressed that at the end of his sentence, 0:07:53.600 --> 0:07:55.600 after he told the Shad that he wouldn't have to 0:07:55.600 --> 0:07:58.480 serve danja Ol, and he said, you know, I'd like 0:07:58.520 --> 0:08:01.120 to just address this Thing's parents on a personal note, 0:08:01.400 --> 0:08:03.240 and he said, there is nothing I can see that 0:08:03.320 --> 0:08:05.800 you did wrong, and then he walked out of the courtroom. 0:08:05.920 --> 0:08:08.760 And I think it was quite an emotional moment in 0:08:08.760 --> 0:08:12.360 the courtroom, especially if Mishad's parents to see that. They 0:08:12.360 --> 0:08:15.160 were I think quite receptive to what he said and 0:08:15.640 --> 0:08:18.760 almost grateful because you can imagine the impact he's had 0:08:19.040 --> 0:08:19.840 on his family. 0:08:20.600 --> 0:08:23.680 So this case is over. What's the next sentencing? 0:08:23.760 --> 0:08:25.880 Is that this final sentencing in this case. 0:08:27.040 --> 0:08:30.960 Yes, we've got one final sentencing hearing left in this 0:08:31.520 --> 0:08:35.120 FTX saga, and that is of Gary Wong. Gary Wong 0:08:35.280 --> 0:08:37.520 was the co founder at STX. He helped build the 0:08:37.559 --> 0:08:41.880 exchange with Sam Bank mcfreed. He became the chief technology officer, 0:08:42.840 --> 0:08:46.079 and he was also a corporating witness and gay testimony 0:08:46.080 --> 0:08:49.199 at Sam's trial. He's due to be sentenced at the 0:08:49.280 --> 0:08:52.160 end of November, so it'll be interesting to see where 0:08:52.679 --> 0:08:56.760 Judge Kaplan puts him on the culpability scale because he 0:08:57.880 --> 0:09:03.440 knew about the afforded STX and animator research a little 0:09:03.440 --> 0:09:07.320 bit earlier than Michez Thing did. Thought from the evidence 0:09:07.320 --> 0:09:10.600 that we heard it call, he wasn't as safely involved 0:09:10.679 --> 0:09:11.760 as Camlin. 0:09:11.440 --> 0:09:14.400 Elision was and of course we should mention that Sam 0:09:14.480 --> 0:09:18.480 Bankman freed is appealing his conviction. Thanks so much, Ava. 0:09:19.000 --> 0:09:22.880 That's Bloomberg Legal reporter Ava. Benny Morrison coming up next 0:09:22.920 --> 0:09:26.199 on the Bloomberg Law Show. The crypto industry is using 0:09:26.240 --> 0:09:30.040 a Texas legal strategy to dial up its attacks on 0:09:30.120 --> 0:09:35.680 the SEC. A leading crypto trading platform is trying a 0:09:35.880 --> 0:09:40.520 preemptive strike against the SEC. Crypto dot Com is suing 0:09:40.559 --> 0:09:43.920 the SEC before the agency has a chance to bring 0:09:44.000 --> 0:09:47.040 an enforcement action against it. And it's suing in the 0:09:47.120 --> 0:09:51.160 strategic venue of Texas, home of the Fifth Circuit, the 0:09:51.160 --> 0:09:54.880 most conservative appellate court in the country, which has restricted 0:09:54.920 --> 0:09:59.280 agency powers, including in the Jocracy case which led to 0:09:59.320 --> 0:10:03.480 a Supreme Court decision last year limiting the SEC's use 0:10:03.600 --> 0:10:06.880 of in house judges. Joining me is securities law expert 0:10:07.000 --> 0:10:11.120 James Park, a professor at UCL Law School. Crypto dot 0:10:11.160 --> 0:10:15.720 Com got a Wells Notice indicating the SEC was going 0:10:15.760 --> 0:10:19.400 to bring an enforcement action, and instead of waiting, it 0:10:19.480 --> 0:10:21.640 beat the SEC to the pun so to speak. 0:10:22.160 --> 0:10:26.320 It did and that's unusual. You know. Wells notice is 0:10:26.400 --> 0:10:29.960 an indication by the SEC that it's panning to bring 0:10:30.000 --> 0:10:33.000 a case, and the purpose of the Wells notice, which 0:10:33.000 --> 0:10:36.280 has been around since the nineteen seventies, is to give 0:10:36.520 --> 0:10:41.280 the potential defendant a chance to provide evidence or arguments 0:10:41.320 --> 0:10:44.640 to the SDC persuading it not to bring a case. 0:10:44.960 --> 0:10:48.720 And so this is unusual in that a typical response 0:10:48.800 --> 0:10:52.040 to a Wells Notice would be to make a final 0:10:52.120 --> 0:10:55.120 attempt to persuade the SEC not to bring a case, 0:10:55.800 --> 0:11:01.080 and instead Crypto has preemptively sued the SDC in the 0:11:01.120 --> 0:11:05.800 Eastern District of Texas and basically argue that it is 0:11:05.920 --> 0:11:09.840 overreaching its jurisdiction even though the SEC is not actually 0:11:10.400 --> 0:11:12.079 voted to bring the case. 0:11:12.960 --> 0:11:16.839 So is the case ripe then for decision if they 0:11:16.880 --> 0:11:20.280 don't know exactly what the SEC would be doing. 0:11:20.720 --> 0:11:23.520 That's the argument I think the SEC is going to make. 0:11:24.040 --> 0:11:26.880 They will argue that we have not decided to sue 0:11:26.880 --> 0:11:29.440 you at this particular point in time, and so there's 0:11:29.480 --> 0:11:33.520 not a ripe dispute that can really be adjudicated in 0:11:33.920 --> 0:11:38.160 this case. I think Crypto dot Com will argue though, 0:11:38.280 --> 0:11:41.440 that well, you know, we know you're going to bring 0:11:41.520 --> 0:11:44.720 enforcement against us. We know the theory because it's been 0:11:44.760 --> 0:11:49.640 asserted against other crypto exchanges. And therefore we should be 0:11:49.679 --> 0:11:56.720 permitted to challenge your policy, your administrative actions, and we 0:11:56.840 --> 0:12:00.040 might have standing because we could be injured or affected 0:12:00.120 --> 0:12:03.800 by that particular decision. But I think that'll be a 0:12:03.840 --> 0:12:06.800 critical issue for the district court to consider whether this 0:12:06.920 --> 0:12:08.319 is indeed a right dispute. 0:12:08.760 --> 0:12:12.840 Crypto dot Com, which is based in Singapore, last year 0:12:12.880 --> 0:12:18.200 moved at US headquarters from Miami to Tyler, Texas. Does 0:12:18.240 --> 0:12:21.720 it seem like that's a move to a friendlier jurisdiction. 0:12:22.559 --> 0:12:27.120 It could be for a variety of reasons, not necessarily 0:12:27.200 --> 0:12:31.640 related to this lawsuit, but simply the lack of a 0:12:31.679 --> 0:12:37.320 state income tax generally a business friendly climate. I would 0:12:37.360 --> 0:12:41.360 be surprised sort of the ability to file in a 0:12:41.440 --> 0:12:45.400 particular jurisdiction is what may have motivated Crypto dot com. 0:12:45.559 --> 0:12:47.720 And you know, I think there are a lot of 0:12:47.760 --> 0:12:50.720 considerations that go into play when you are moving your 0:12:51.120 --> 0:12:55.800 headquarters from one place to another, But certainly the fact 0:12:55.840 --> 0:12:58.240 that it is in Texas now it's more of a 0:12:58.400 --> 0:13:01.680 natural place for the like this to be filed as 0:13:01.720 --> 0:13:04.800 opposed if they were in Miami and filing in Texas, 0:13:04.880 --> 0:13:07.720 it'd be more of an attenuated link between Crypto dot 0:13:07.760 --> 0:13:10.400 Com and Texas if its headquarters was not located. Now, 0:13:10.600 --> 0:13:14.000 certainly they have customers in Texas, they do business in Texas, 0:13:14.040 --> 0:13:16.320 and so they could argue they should still be able 0:13:16.360 --> 0:13:18.720 to see in Texas. But the fact that they are 0:13:18.760 --> 0:13:21.640 headquarters there may make the arguments that the case should 0:13:21.640 --> 0:13:23.680 be in Texas a little bit stronger. 0:13:24.080 --> 0:13:27.440 Any case in Texas that's appealed would be appealed to 0:13:27.520 --> 0:13:32.520 the Fifth Circuit, which is notoriously conservative and has struck 0:13:32.600 --> 0:13:35.560 down a slough of Biden regulations. 0:13:36.000 --> 0:13:41.679 It hasn't particularly with respect to SEC regulations. They are 0:13:41.720 --> 0:13:47.760 struck down very extensive, ambitious regulations of hedge funds private 0:13:47.800 --> 0:13:52.880 funds that would have required disclosure relating to fees, and 0:13:53.400 --> 0:13:57.679 they have struck down disclosure rules were leading to stock 0:13:57.760 --> 0:14:03.760 repurchases by companies. They basically said, the SEC arbitrarily changed 0:14:03.800 --> 0:14:09.000 its position on a proxy advisory firms and the advice 0:14:09.080 --> 0:14:12.720 they give with respect to voting. One exception, though, with 0:14:12.760 --> 0:14:16.480 respect to the Fifth Circuit, is that initially they upheld 0:14:17.400 --> 0:14:21.840 various rules relating to diversity and diversity disclosure passed by 0:14:21.840 --> 0:14:25.760 the Nasdaq, which is a regulated exchange that is regulated 0:14:25.800 --> 0:14:28.840 by the SEC, and past various rules saying that if 0:14:28.840 --> 0:14:31.120 you don't have a certain diversity on your board, you 0:14:31.120 --> 0:14:34.880 have to issue disclosure a panel that this circuit initially 0:14:35.400 --> 0:14:40.440 upheld that decision, but the entire Fifth Circuit unboked. The 0:14:40.600 --> 0:14:45.280 entire court decided to review that decision, and reports of 0:14:45.320 --> 0:14:48.440 the argument indicate that they may strike down that rule 0:14:48.440 --> 0:14:51.240 as well. So the answer is yes, so that the 0:14:51.240 --> 0:14:55.880 Fifth Circuit generally has not been a favorable court for 0:14:56.160 --> 0:14:56.960 the SEC. 0:14:57.240 --> 0:15:00.720 If the SEC brings in action, would it be brought 0:15:00.760 --> 0:15:01.800 in the second Circuit? 0:15:02.080 --> 0:15:06.040 It depends. I think it depends on the circumstances. And 0:15:06.120 --> 0:15:08.960 they have sort of a wide amount of discretion. Is 0:15:08.960 --> 0:15:12.200 where they can file a suit. And you know, wherever 0:15:12.520 --> 0:15:16.480 there are investors who have been harmed by a particular 0:15:16.760 --> 0:15:19.680 practice and so forth, that they might choose to sue 0:15:19.720 --> 0:15:22.960 in that venue. But you know, they could have chosen Texas. 0:15:23.040 --> 0:15:25.600 You know, the SEC might have simply said, your headquarters 0:15:25.680 --> 0:15:28.000 in Texas will sue you in Texas. They might have 0:15:28.040 --> 0:15:31.360 suit in Washington, DC. That's another place where they can 0:15:31.400 --> 0:15:34.640 bring suit, and they often bring suit in the Southern 0:15:34.680 --> 0:15:37.640 District of New York. There's a common venues and there's 0:15:37.680 --> 0:15:40.160 a lot that goes into I think choosing a venue 0:15:40.160 --> 0:15:42.880 there's no real science to it, And I think they 0:15:43.000 --> 0:15:47.920 actually still could sue Crypto dot Com in another jurisdiction, 0:15:48.080 --> 0:15:50.720 in another venue if they chose to bring a case 0:15:50.760 --> 0:15:54.000 against Crypto. I don't think there's anything about this particular 0:15:54.120 --> 0:15:58.240 case that precludes them from suing Crypto independently in the 0:15:58.320 --> 0:16:01.080 enforcement action that they might have been planning to bring. 0:16:01.440 --> 0:16:04.840 And then you could have concurrent lawsuits where you could 0:16:04.840 --> 0:16:07.720 have this proceeding in Texas at the same time as 0:16:07.760 --> 0:16:11.960 a SEC enforcement case against Crypto and Washington DC, and 0:16:12.040 --> 0:16:15.200 that poses a certain complication, which might be you know, 0:16:15.240 --> 0:16:18.560 an argument for dismissing one of the cases on ripe 0:16:18.640 --> 0:16:20.720 this grounds is that it may not be a good 0:16:20.760 --> 0:16:24.400 thing to have two concurrent lawsuits against the same defendants 0:16:24.400 --> 0:16:27.200 that are basically deciding the same issue. 0:16:27.440 --> 0:16:32.240 So is Crypto dot COM's lawsuit about the SEC's power 0:16:32.280 --> 0:16:33.680 about agency power? 0:16:34.200 --> 0:16:36.840 That's certainly part of it. It is a broader question, 0:16:36.920 --> 0:16:40.240 and they're they're interrelating, right, it's sort of you know, 0:16:40.320 --> 0:16:45.360 I'm questioning your agency power, your jurisdiction that could be 0:16:45.400 --> 0:16:49.560 asserted against US. And if the SEC brought a case 0:16:49.680 --> 0:16:53.520 against Crypto, the assumption is that the SEC has jurisdiction 0:16:53.680 --> 0:16:56.880 and power, it would be just more of a background issue. 0:16:56.960 --> 0:17:00.720 Both cases, I think would raise the same basic issue, 0:17:01.640 --> 0:17:04.639 but you know, the one in Texas, I think is 0:17:04.720 --> 0:17:07.840 much more hypothetical and it's much more of a hypothetical 0:17:08.440 --> 0:17:13.119 injury to Crypto dot Com. Whereas if the SEC sues 0:17:13.200 --> 0:17:18.160 Crypto dot Com, then Crypto has a very clear basis 0:17:18.200 --> 0:17:21.240 for saying that we have been injured by the SEC's 0:17:21.280 --> 0:17:24.560 action and the SEC does not have authority, and so 0:17:25.040 --> 0:17:28.760 there's an argument that it might be better to decide 0:17:28.800 --> 0:17:32.520 that issue in that concrete setting where the SEC has 0:17:32.560 --> 0:17:37.920 asserted it's jurisdiction under Crypto, rather than hypothetically wondering whether 0:17:37.960 --> 0:17:40.920 the SEC does have jurisdiction over Crypto. 0:17:41.359 --> 0:17:46.359 We've talked before about how Crypto has been fighting the 0:17:46.520 --> 0:17:51.560 SEC in different ways. Is this affirmative litigation part of 0:17:51.600 --> 0:17:53.000 a broader strategy. 0:17:53.640 --> 0:17:57.960 It's a good question as to whether there's any coordination. No, 0:17:58.160 --> 0:18:03.320 is there a crypto industry that is essentially strategize That's 0:18:03.359 --> 0:18:07.000 something I just don't know, but you know, certainly these 0:18:07.119 --> 0:18:10.920 arguments are out there, and they've been developed in earlier 0:18:11.000 --> 0:18:16.919 cases by by Ripple by binance by coinbase, and I 0:18:16.960 --> 0:18:21.440 think crypto dot Com and its attorneys and I've learned 0:18:21.480 --> 0:18:25.720 from those arguments, and I think that they are trying 0:18:25.760 --> 0:18:29.520 to open up another front in the battle. And perhaps 0:18:29.600 --> 0:18:32.280 their belief is that, you know, if you can get 0:18:32.400 --> 0:18:36.160 a favorable decision from a Texas court, a fifth Circuit court, 0:18:37.119 --> 0:18:40.560 that that might help our cause in some way with 0:18:41.200 --> 0:18:45.120 other appellate judges or the US Supreme Court. And so 0:18:45.320 --> 0:18:47.639 I think that you know, even if there is not 0:18:47.760 --> 0:18:53.159 coordination among various members of the industry, there is just 0:18:53.640 --> 0:18:57.720 a concerted industry argument that is being asserted in different 0:18:58.280 --> 0:19:03.280 venues and in jurisdiction that you know, may ultimately be 0:19:03.320 --> 0:19:07.480 decided by the US Supreme Court. And having a variety 0:19:07.520 --> 0:19:10.680 of judges weigh in could be helpful to the crypto 0:19:10.760 --> 0:19:15.399 industry if you're getting more favorable ruling that are skeptical 0:19:15.640 --> 0:19:19.400 of the SEC's jurisdiction of a crypto asset. Now, there's 0:19:19.440 --> 0:19:22.879 also a risk though to a strategy where you're bringing 0:19:22.960 --> 0:19:25.800 multiple cases, is that some of those cases may go 0:19:25.920 --> 0:19:28.640 against you and so forth. You know, I also think 0:19:28.680 --> 0:19:31.480 there's a pr aspect to this as well, where you know, 0:19:31.560 --> 0:19:35.680 we're filing a high profile action against the SEC. Let's 0:19:35.720 --> 0:19:39.440 create this narrative that you know, the SEC is abusing 0:19:39.480 --> 0:19:42.359 its authority and that a lot of folks are angry 0:19:42.440 --> 0:19:46.200 about them. Are you know? Basically it's coming up again 0:19:46.280 --> 0:19:49.399 and again, right, I think you know that coinbase and 0:19:49.520 --> 0:19:52.200 binance cases are not really in the news as much. 0:19:52.280 --> 0:19:56.200 So hey, let's let's bring this preemptive action and keep 0:19:56.200 --> 0:19:59.200 this in the public discourse to put pressure on the SEC. 0:20:00.160 --> 0:20:03.639 So to keep the issue alive as we lobby for 0:20:04.200 --> 0:20:05.560 more favorable regulation. 0:20:05.800 --> 0:20:09.439 We're certainly paying attention to it. So in September, a 0:20:09.520 --> 0:20:13.400 judge in Texas dismissed a case brought by a crypto company, 0:20:13.800 --> 0:20:17.200 and he found that wells notice and subsequent suit from 0:20:17.200 --> 0:20:21.800 the SEC weren't final actions and that the case was 0:20:21.840 --> 0:20:25.280 therefore premature. But this is being a sign to Judge 0:20:25.400 --> 0:20:29.600 Jeremy Kernadel, who ruled in July to freeze rulemaking by 0:20:29.600 --> 0:20:33.000 the Labor Department. I mean he wouldn't have to follow 0:20:33.080 --> 0:20:35.160 the other judge's determination. 0:20:35.400 --> 0:20:38.840 Right, That's true. It's not binding. It's a district court decision, 0:20:38.880 --> 0:20:41.960 so it's not binding on another district court. The reason 0:20:42.119 --> 0:20:45.800 could be influential though, and it's certainly something I'm sure 0:20:46.040 --> 0:20:49.159 that the judge will look at very closely. You know, 0:20:49.359 --> 0:20:53.080 there may be some differences between Crypto dot COM's case 0:20:53.119 --> 0:20:57.000 and the prior case, and you know, I read something 0:20:57.080 --> 0:20:59.879 very quickly about that prior case by I can consent, 0:21:00.359 --> 0:21:02.679 and I think in that case it was very clear 0:21:03.160 --> 0:21:05.800 at some point that the SEC would not bring an action, 0:21:06.920 --> 0:21:09.800 and so maybe that's the way you would distinguish the 0:21:09.800 --> 0:21:13.840 Crypto dot Com case in that I'm fairly certain that 0:21:13.880 --> 0:21:16.600 the SEC will bring an action against Crypto dot Com. 0:21:16.640 --> 0:21:21.280 It's a very similar fact pattern as Binance and coinbase, 0:21:21.640 --> 0:21:24.040 and so Crypto dot Com will say, sure, they haven't 0:21:24.040 --> 0:21:27.560 decided to bring a suit against that, but given our 0:21:27.640 --> 0:21:31.720 knowledge of their past enforcement activity, it's very unlikely that 0:21:31.800 --> 0:21:34.280 they will not. I think that's the argument Crypto dot 0:21:34.320 --> 0:21:35.560 Com might try to make. 0:21:36.080 --> 0:21:39.560 What do you think of Crypto dot COM's tactic in general? 0:21:40.160 --> 0:21:45.320 You know, it's a very interesting move to preemptively sue 0:21:45.359 --> 0:21:48.560 before the SEC can bring an action. I think that 0:21:48.720 --> 0:21:52.600 is extremely interesting, and it's aggressive. It is certainly aggressive, 0:21:52.920 --> 0:21:55.840 and I think they are certainly trying to take advantage 0:21:55.840 --> 0:21:59.760 of a favorable venue. They may believe the SEC would 0:21:59.760 --> 0:22:03.800 never decide to file in Texas given its past experience 0:22:03.920 --> 0:22:06.480 with the Fifth Circuit, and that may very well proved 0:22:06.520 --> 0:22:09.440 to be true, but it's also unclear. The decision has 0:22:09.480 --> 0:22:12.000 not been made, and I think this is an interesting 0:22:12.359 --> 0:22:15.880 choice of litigation strategy and we'll see how it turned out. 0:22:16.119 --> 0:22:19.520 Thanks so much, Jim. That's Professor James Park of UCLA 0:22:19.640 --> 0:22:24.399 Law School. Coming up next. Delta sues CrowdStrike. This is Bloomberg. 0:22:25.560 --> 0:22:30.679 Delta Airlines is suing cybersecurity firm CrowdStrike over the chaos 0:22:30.680 --> 0:22:34.760 caused this summer by a software update that disabled millions 0:22:34.760 --> 0:22:39.040 of computers worldwide and grounded much of the airline's passenger fleet. 0:22:39.359 --> 0:22:43.760 Delta is accusing the cybersecurity firm of gross negligence that 0:22:43.880 --> 0:22:49.119 costs the airline five hundred million dollars. CrowdStrike apologized publicly 0:22:49.400 --> 0:22:53.679 after the July nineteenth glitch that shut down computers running 0:22:53.680 --> 0:22:59.800 the Microsoft Windows operating system, paralyzing airports, banks, stock exchanges 0:23:00.240 --> 0:23:06.000 businesses around the world, But CrowdStrike says Delta is giving misinformation, 0:23:06.520 --> 0:23:10.880 doesn't understand cybersecurity, and is trying to shift the blame 0:23:10.960 --> 0:23:14.280 for its slow recovery from the outage, joining me is 0:23:14.320 --> 0:23:18.760 an expert in cybersecurity, doctor Ilia Koloshchenko. He's a partner 0:23:18.760 --> 0:23:22.840 in cybersecurity practice, lead at PLAT Law and CEO of 0:23:23.080 --> 0:23:29.240 Immune Web. This was a global technology outage, so isn't 0:23:29.280 --> 0:23:33.040 it obvious that CrowdStrike bears the blame. 0:23:33.560 --> 0:23:36.000 I don't think it would be fair to say that 0:23:36.359 --> 0:23:40.760 it is crowdstrikes fault before we get all the texts. 0:23:41.160 --> 0:23:46.080 Of course, I'm not saying that CrowdStrike is completely blame last, 0:23:46.680 --> 0:23:53.080 but I'm unconvened that we have solid matters to claim 0:23:53.320 --> 0:23:57.160 financial damages, and I believe that we need to investigate 0:23:57.200 --> 0:24:00.640 these cases a little bit more because, based on crowd 0:24:00.800 --> 0:24:06.800 strike public announcement and the details that they disclosed about 0:24:07.000 --> 0:24:11.800 the incident, such kind of incidents may happen virtually everywhere, 0:24:12.000 --> 0:24:15.720 so it was not like a negligence that can we 0:24:15.800 --> 0:24:18.240 can Reprimand I think, what do. 0:24:18.160 --> 0:24:20.760 We know so far about what caused this? 0:24:21.680 --> 0:24:24.800 So to the depth of my knowledge, it was a 0:24:24.880 --> 0:24:31.520 faulty update that was not tested as sophisticatedly as it 0:24:31.680 --> 0:24:35.920