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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 1: The US Supreme Court opened a new term today, and

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Speaker 1: in the next nine months, an outside share of the

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Speaker 1: High Court's biggest cases will come from the ultra conservative

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Speaker 1: Fifth US Circuit Court of Appeals, whose far reaching rulings

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Speaker 1: are proving impossible for the justices to ignore. Cases involving

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Speaker 1: federal regulatory power, guns and social media regulation will test

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Speaker 1: just how far the Supreme Court's conservative majority wants to

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Speaker 1: go in remaking the nation's legal landscape. Joining me is

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Speaker 1: Bloomberg New Supreme Court reporter Greg Store. Greg just how

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Speaker 1: conservative is the Fifth Circuit.

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Speaker 2: It's unquestionably the most conservative federal appeals court in the country,

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Speaker 2: and it gets an awful lot of cases, so we

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Speaker 2: notice it even more than other courts. On this court,

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Speaker 2: twelve of its full time judges are Republican appointees and

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Speaker 2: only for our Democratic appointees. And six of those Republican

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Speaker 2: appointees are appointees of Donald Trump. And you know, they

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Speaker 2: include some justices who are really trying to make a

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Speaker 2: name for themselves with some really far reaching rulings. And

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Speaker 2: so it's kind of consistently the place where conservatives go

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Speaker 2: when they are looking to push the law in a

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Speaker 2: certain direction.

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Speaker 1: There have been a lot of stories about the Texas

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Speaker 1: judges who have become the go to judges, for example,

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Speaker 1: for Republican states that want to sue. Tell us about

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Speaker 1: the Trump appointees on the Fifth Circuit, because what seems

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Speaker 1: unusual about them is they're not only conservative, but several

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Speaker 1: of them made statements before they became judges that staked

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Speaker 1: out very conservative positions on issues like abortion and gay marriage.

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Speaker 2: Yeah. So there's also one who while on the bench

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Speaker 2: has made some really remarkable statements. That's James ho He's

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Speaker 2: a Trump appointee. He's described abortion while on the bench

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Speaker 2: as a moral tragedy and written that if there's too

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Speaker 2: much money and power politics, because there's too much government.

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Speaker 2: And then there's some other judges that really drew a

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Speaker 2: lot of controversy when they were nominated. A guy like

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Speaker 2: Corey Wilson, who had written that gay marriage is a

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Speaker 2: pander to liberal interest groups. Another judge, Stuart Kyle Duncan,

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Speaker 2: who has written a lot of things in opposition to

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Speaker 2: LGBTQ rights, and he was a judge who drew that

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Speaker 2: protest at Stanford Law School, where protesters shut him down,

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Speaker 2: wouldn't let him speak. So he's very much a lightning rod.

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Speaker 1: The Fifth Circuit hasn't been bearing that well at the

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Speaker 1: Supreme Court. To me, it's taken the position the Ninth

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Speaker 1: Circuit used to take, where it was the most reversed

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Speaker 1: circuit for so many years. So tell us how it's

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Speaker 1: done in the past year.

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Speaker 2: Not very well. So in the last Supreme Court term,

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Speaker 2: in seven of nine cases, the Court decided if at

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Speaker 2: least partially or largely reversed the Fifth Circuit. And the

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Speaker 2: way it's different just to go back to the Ninth Circuit.

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Speaker 2: The way it's different is the Ninth Circuit I had

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Speaker 2: a well deserved reputation back in the day as being very,

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Speaker 2: very very liberal, and the Supreme Court, even when it

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Speaker 2: wasn't as conservative as this Court is, would say, no,

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Speaker 2: we're not going to let you do that. Ninth Circuit. Here,

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Speaker 2: it's a case where the Fifth Circuit is trying to

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Speaker 2: sort of go beyond where the Supreme Court has gone.

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Speaker 2: It is a conservative Supreme Court, and we have the

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Speaker 2: Fifth Circuit trying to push the envelope even beyond where

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Speaker 2: the Supreme Court is gone do.

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Speaker 1: Some of their decisions seem like decisions that the Supreme

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Speaker 1: Court almost has to take or it will allow the

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Speaker 1: law to be, you know, even further out or even

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Speaker 1: more conservative than the Court envisioned.

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Speaker 2: Yeah. So a number of the cases the Supreme Court

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Speaker 2: has this term are cases where the Biden administration is

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Speaker 2: appealing and there are cases where the Fifth Circuit struck

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Speaker 2: down something that either an administrative agency or Congress did.

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Speaker 2: So one example, there is a law that says the

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Speaker 2: people subject to a domestic violence restraining order can have

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Speaker 2: their Second Amendment rights gun rights taken away. The Fifth

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Speaker 2: Circuits that, Nope, that law is unconstitutional. The Biden ministry

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Speaker 2: came up to the Supreme Court, and really, in that

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Speaker 2: sort of situation, the Court almost has to take the case.

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Speaker 2: So we're going to now see what the Supreme Court

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Speaker 2: thinks about that interpretation of the Second Amendment.

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Speaker 1: Yeah, that's guaranteed to be one of the biggest cases

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Speaker 1: of the term. And my favorite line from that really

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Speaker 1: was the Fifth Circuit saying that while the defendant there

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Speaker 1: Raheemi was quote hardly a model citizen, he was entitled

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Speaker 1: to Second Amendment protections. And this is a defendant who

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Speaker 1: not only had a restraining order against him by his

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Speaker 1: former girlfriend, but also shot his gun in public I

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Speaker 1: think five times. So not exactly a model defendant for

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Speaker 1: a case like this.

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Speaker 2: No, And in fact, if you're a Second Amendment advocate,

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Speaker 2: a really bad defended to have in a case like this.

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Speaker 2: You have both this law that protects again something that

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Speaker 2: is pretty commonly understood to be a very very dangerous

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Speaker 2: situation to somebody with a domestic violence restraining order having

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Speaker 2: access to firearms. Also have somebody who a judge found

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Speaker 2: had engaged in all sorts of criminal violent activity. And

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Speaker 2: the confluence of those things make it a case where,

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Speaker 2: even with this conservative Supreme Court, it's going to be

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Speaker 2: pretty hard for them to explain why mister Rahimi is

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Speaker 2: somebody who is entitled to keep his Second Amendment right.

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Speaker 1: The Supreme Court has several cases that may allow it

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Speaker 1: to expand its attempt to rein in the administrative state,

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Speaker 1: and a couple come from the Fifth Circuit coming up

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Speaker 1: tomorrow oral arguments in the Consumer Financial Protection Bureau's funding system.

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Speaker 1: The second time I think the CFPB has been before

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Speaker 1: the Court. So tell us about this Fifth Circuit decision.

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Speaker 2: Yeah, it is the second time the CFPB has been

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Speaker 2: up before the Supreme Court. This case has to do

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Speaker 2: with how the bureau gets its money. It gets its

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Speaker 2: money through the Federal Reserve system. It doesn't rely on

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Speaker 2: the year to year congressional appropriations, and that was a

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Speaker 2: part of Congress's design and creating the bureau after the

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Speaker 2: two thousand and eight financial crisis. They wanted to give

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Speaker 2: the CSPB a certain amount of independence, shielded from the

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Speaker 2: political processes. And what the Fifth Circuit said was this

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Speaker 2: system violates the constitutional provision that says government spending has

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Speaker 2: to be done via a congressional appropriation. Now, in the past, courts,

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Speaker 2: in concluding the Supreme Court have said that provision is

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Speaker 2: something that keeps the executive branch from spending money that

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Speaker 2: Congress hasn't authorized to be spent. Courts haven't used it

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Speaker 2: to restrict Congress and the way they can set up

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Speaker 2: an agency. Well, the Fifth Circuit did in this case.

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Speaker 2: So it's a novel constitutional approach. There's not a whole

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Speaker 2: lot to go by in terms of precedent, and it's

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Speaker 2: going to be very interesting to see how the Supreme

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Speaker 2: Court deals with that and then what it decides to

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Speaker 2: do if immediate agrees that the system is unconstitutional.

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Speaker 1: There's another case, and it's the SEC and its use

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Speaker 1: of in house judges. Another issue that's been before the court.

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Speaker 1: And the Fifth Circuit found three different problems.

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Speaker 2: With the three different problems, two of them are sort

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Speaker 2: of connected and that may be kind of the biggest

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Speaker 2: part of the case. The Fifth Circuit said that under

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Speaker 2: the Constitution, folks hit with an SEC complaint in many

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Speaker 2: cases have a right to a jury trial, meaning the

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Speaker 2: SEC cannot bring those cases before an administrative law judge

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Speaker 2: at the agency. They have to go into federal court.

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Speaker 2: And then the related aspect of the ruling is the

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Speaker 2: Fifth Circuit said, and Congress did not give clear enough

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Speaker 2: guidance to the SEC, clear enough principles to decide which

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Speaker 2: cases it's going to take before the administrative law judge

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Speaker 2: and which case is going to go to the Supreme Court.

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Speaker 2: The final issue is that the Fifth Circuit said that

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Speaker 2: the job protections that the administrative law judge is that

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Speaker 2: the SEC have leieve them too insulated from presidential control.

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Speaker 2: That's an issue the Supreme Court is considered in slightly

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Speaker 2: different contexts before. So if the Supreme Court wants to

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Speaker 2: rule against the sec. It's got kind of a menu

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Speaker 2: of ways they can do that.

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Speaker 1: Coming up next on the Bloomberg Lawn Show, I'll continue

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Speaker 1: this conversation with Bloomberg New Supreme Court reporter Greg Store,

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Speaker 1: and we'll talk about Justice Clarence Thomas recusing himself from

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Speaker 1: a case involving January sixth. Last term, the Fifth Circuit

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Speaker 1: did not fare well at the Supreme Court. The Court

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Speaker 1: at least partially rejected the Fifth Circuit's position in seven

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Speaker 1: of nine cases this term. Fights are teed up over

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Speaker 1: the Fifth Circuit's decisions on federal regulatory power, guns, and

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Speaker 1: social media regulation. Here's former US Solicitor General Gregory Gar's

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Speaker 1: take on the Fifth Circuit's role this term.

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Speaker 3: That's truly, you know, one of the broader themes that

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Speaker 3: we're seeing this court. And some people have said it's

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Speaker 3: sort of the Supreme Court versus the Fifth Circuit. It's interesting.

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Speaker 3: I mean, the Fifth Circuit is now the most conservative

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Speaker 3: circuit among the many, and you know, the kind of

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Speaker 3: question that all these cases present is whether the Fifth

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Speaker 3: Circuit has got out ahead of even the US Supreme

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Speaker 3: Court today in terms of how conservative it is and

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Speaker 3: whether or not the US Supreme Court feels as though

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Speaker 3: it has to rein it in a little bit. And

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Speaker 3: although this Supreme Court is certainly one of the most

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Speaker 3: conservative in history, as we saw last term, there's still

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Speaker 3: a few justices in the center that are not necessarily

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Speaker 3: as comfortable going as far as some of the justices

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Speaker 3: at the far right want to go. The Chief Justice

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Speaker 3: Justice Capital and so in each of these cases, the

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Speaker 3: spotlight is really going to be on those justices in

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Speaker 3: the middle and whether or not they're comfortable adopting these

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Speaker 3: broader theories.

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Speaker 1: I've been discussing the Fifth Circuit with Bloomberg New Supreme

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Speaker 1: Court reporter Greg Store. Two cases that the justices just

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Speaker 1: decided to take up last week involve free speech, the

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Speaker 1: rights of social media companies, and a Fifth Circuit decision

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Speaker 1: that clashes with an Eleventh Circuit decision. The eleven Circuit

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Speaker 1: probably the second most conservative circuit in the country.

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Speaker 2: It is a very conservative feels court as well. These

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Speaker 2: are laws that were put into place by Republican controlled

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Speaker 2: states Texas and Florida, and they basically dictate the social

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Speaker 2: media companies how they should go about managing content and

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Speaker 2: removing misinformation, and they have rules about what they have

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Speaker 2: to say when they take down a post online, and

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Speaker 2: the social media industry trade groups sued and said that

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Speaker 2: violates our First Amendment rights. The Fifth Circuit upheld the

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Speaker 2: Texas law so that law would go into effect. Under

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Speaker 2: that ruling, the Eleventh Circuit struck down much of Florida's law.

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Speaker 2: It's a little bit different. The eleven Circuit devoted much

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Speaker 2: of its focus to a provision that requires a detailed

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Speaker 2: explanation every time a social media company makes a content

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Speaker 2: management decision. So this is going to be a big

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Speaker 2: both First Amendment free speech fight and a political fight

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Speaker 2: since a lot of this is about, you know, posts

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Speaker 2: that make political statements and you know, talk about things

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Speaker 2: like whether an election was fair.

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Speaker 1: The Supreme Court could also take up a Fifth Circuit

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Speaker 1: case on the abortion pill MiFi Pristone Greig. This decision

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Speaker 1: by a conservative Texas Christian federal judge which went to

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Speaker 1: the Fifth Circuit, has already been at the Supreme Court once.

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Speaker 2: Yeah, so right now, the abortion pill is fully available,

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Speaker 2: and that's because the Supreme Court several months ago issued

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Speaker 2: a stay that kept the pill fully on the market

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Speaker 2: while this legal fight goes forward. That was a significant

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Speaker 2: win for Biden administration and abortion rights groups. The question

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Speaker 2: is basically whether the Food and Drug Administration, when it

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Speaker 2: approved the drug considered all the things that was supposed

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Speaker 2: to do, and then later on when the FDA under

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Speaker 2: Joe Biden and Barack Obama expanded access to it, allowing

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Speaker 2: things like mail order allowing the drug to be mailed

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Speaker 2: to people directly and meaning they didn't have to go

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Speaker 2: to a doctor obtain it, whether those things complied with

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Speaker 2: the rules that got administrative agencies. The district judge you

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Speaker 2: reference blocked the drug entirely, or said he would have

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Speaker 2: blocked the drug entirely. The Fifth Circuit eased up on

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Speaker 2: that a little bit. Instead, some changes that were made

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Speaker 2: starting in twenty sixteen to widen access to it. We're

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Speaker 2: going to block those, And for the time being everything

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Speaker 2: is on hold. The drug is fully available, but the

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Speaker 2: Supreme Court has not yet said whether it will take

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Speaker 2: that case. The Biden administration has filed its appeal. It'll

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Speaker 2: probably be later on this year. Again, this is one

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Speaker 2: of these cases where because the appeals court said the

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Speaker 2: federal government has done something wrong and the administration is appealing.

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Speaker 2: It's the kind of case the Supreme Court almost always

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Speaker 2: takes the Supreme Court is going to consider whether the

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Speaker 2: FBA you took some shortcuts or didn't fully consider what

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Speaker 2: it was supposed to consider when it expanded access to

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Speaker 2: the drug.

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Speaker 1: I thought when the Supreme Court issued this stay, they

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Speaker 1: were sort of telling the Fifth Circuit, you know, we

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Speaker 1: don't want to deal with this, But the Fifth Circuit

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Speaker 1: just went ahead.

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Speaker 2: Yeah, the Fifth Circuit essentially reaffirmed what it had suggested previously,

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Speaker 2: saying that these changes that allowed mail distribution, for example,

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Speaker 2: were in violation of the law. And so it did

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Speaker 2: not take that message from the Supreme Court that it

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Speaker 2: was supposed to the back full access to this drug.

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Speaker 2: And now we'll see. You know, sometimes when the Supreme

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Speaker 2: Court issues in emergency order a stay order, you know,

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Speaker 2: sometimes it's a very good indication of how they're going

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Speaker 2: to come out on the marriage. But as we saw

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Speaker 2: in the case last term involving Alabama and redistricting and

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Speaker 2: the creation of a second majority black district in the state,

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Speaker 2: sometimes that's not the case, and sometimes the Supreme Court

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Speaker 2: goes in a different direction. So this will undoubtedly be

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Speaker 2: a very very hotly contested fight.

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Speaker 1: How long does the Supreme Court stay remain in effect.

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Speaker 1: I mean the Fifth Circuit has already issued its decision twice.

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Speaker 2: Yes, the Supreme Court stay remains in effect until they

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Speaker 2: either say no, we're not going to take the government's appeal,

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Speaker 2: or until after they take the appeal and resolve the case.

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Speaker 2: So the stay essentially keeps the drug fully available until

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Speaker 2: the Supreme Court makes a final decision one way or another.

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Speaker 4: IRV.

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Speaker 1: Gornstein of Georgetown Law Center said some of the Fifth

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Speaker 1: Circuits decisions that will be reviewed this term may well

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Speaker 1: be affirmed. Not every one of them was delivered from

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Speaker 1: crazy Town, but it would be shocking if at least

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Speaker 1: some of those decisions are not reversed. And that seems

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Speaker 1: to be the problem. These decisions are not just conservative,

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Speaker 1: but their novel. They just seem not wedded to precedent.

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Speaker 2: You know, some of them are taking on new issues.

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Speaker 2: The appropriations clause issue is one that hasn't really been tested,

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Speaker 2: at least not recently. And some of them, you look

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Speaker 2: at the gun case, for example, the Rehimi case, when

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Speaker 2: the Supreme Court ruled on the right to carry a

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Speaker 2: gun in twenty twenty two, the Court said the test

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Speaker 2: is going to be history and tradition, and you're suppose, judges,

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Speaker 2: you're supposed to look and try to find a historical

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Speaker 2: analog for some current regulation. And if you can't find

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Speaker 2: an historical analog, that's a pretty good sign that this

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Speaker 2: provision is unconstitutional. And that's the analysis the Fifth Circuit

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Speaker 2: went into. And so as it comes back here, the

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Speaker 2: Supreme Courts in the position of saying, well, you took

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Speaker 2: that a little too far. So, you know, in some

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Speaker 2: cases it is the Fifth Circuit going off on its own,

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Speaker 2: and in other cases it's you know, at least arguably

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Speaker 2: taking what the Supreme Court has given it and running

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Speaker 2: with it.

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Speaker 1: That landmark Second Amendment Supreme Court decision seems to need

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Speaker 1: some clarification because it's causing confusion in lower courts. Before

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Speaker 1: you go, Greg, I want to talk about Justice Clarence

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Speaker 1: Thomas recusing himself today. Tell us about the case he

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Speaker 1: recured used from.

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Speaker 2: So this is an appeal by John Eastman. He is

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Speaker 2: the former lawyer to the President Trump. He is somebody

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Speaker 2: who is under indictment as part of the Georgia case

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Speaker 2: legend a criminal conspiracy to overturn the election. And this

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Speaker 2: case stems from efforts by the House committee investigating the

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Speaker 2: January sixth attack to get his emails, and he was

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Speaker 2: arguing privilege. And Justice Thomas, who heretofore has not recused

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Speaker 2: for many January sixth related case, did recuse from the

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Speaker 2: Court's decision not to hear John Eastman's appeal. Now, Justice

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Speaker 2: Thomas did not give any explanation for it. It's by

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Speaker 2: no means clear that he is having a change of heart.

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Speaker 2: There are reasons why in this Eastman case, maybe in

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Speaker 2: his mind it's a little bit different. John Eastman is

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Speaker 2: a former law clerk of Justice Thomas. These emails, report

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Speaker 2: from Politico about a year ago, included some back and

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Speaker 2: forth in which Eastman says that in the course of

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Speaker 2: the twenty twenty election fight that the best hope was

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Speaker 2: to get something before Justice Thomas. So the emails may

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Speaker 2: well talk about Justice Thomas directly, but in any event,

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Speaker 2: it is a noteworthy moment because Justice Thomas did refuse himself.

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Speaker 1: There's been a lot of pressure on Justice Thomas to

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Speaker 1: recuse himself, especially in the January sixth cases. But what

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Speaker 1: you're saying is this may just be an isolated instance.

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Speaker 2: It's possible, it's really Again, he didn't give an explanation.

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Speaker 2: Some justices do give an explanation. That's something that the

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Speaker 2: Court as a whole has been trying to do a

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Speaker 2: little bit more. But it's kind of justice by justice,

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Speaker 2: and he gave us no indication why. So we're left

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Speaker 2: to speculate. And I certainly am not going to sit

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Speaker 2: here and say I am now confident he's going to

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Speaker 2: refuse from every January sixth case because that is probably

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Speaker 2: not the case.

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Speaker 1: Probably not. Thanks so much, Greg. It's a busy term ahead.

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Speaker 1: That's Bloomberg News Supreme Court reporter Greg Store coming up

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Speaker 1: next on the Bloomberg Lawn Show Inside JP Morgan Chase's

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Speaker 1: Year of being Haunted by Jeffrey Epstein, and later in

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Speaker 1: the show, the trial of Sam Bankman freed on front charges,

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Speaker 1: begins tomorrow. JP Morgan Chasing Company has reached settlements with

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Speaker 1: the US Virgin Islands and former executive Jess Staley overties

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Speaker 1: to Jeffrey Epstein as it seeks to end its legal

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Speaker 1: woes over its banking relationship with a notorious sex offender.

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Speaker 1: The biggest US bank tentatively agreed to pay seventy five

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Speaker 1: million dollars to the US Virgin Islands, a tiny number

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Speaker 1: for the firm which generates that much revenue in about

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Speaker 1: five hours. Joining me is Bloomberg Legal reporter AVA Benny Morrison,

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Speaker 1: whose story is entitled Inside JP Morgan's Year of Being

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Speaker 1: Haunted by Jeffrey Epstein, was the top bress at JP

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Speaker 1: Morgan's surprise to learn that the Virgin Islands was pursuing

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Speaker 1: a claim against them having to do with Epstein.

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Speaker 4: Apparently so they sne our reporting. We know that before

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Speaker 4: this case even got to court, the US Virgin Islands

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Speaker 4: sat down with lawyers for JP Morgan and laid out

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Speaker 4: the findings of their investigation, alleging that they violated different

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Speaker 4: banking laws and essentially accusing the bank of facilitating Jeffrey

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Speaker 4: EPs seen sex trafficking. There was a bit of a sense,

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Speaker 4: I think that the bank wasn't taking it as seriously

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Speaker 4: as maybe they should have, and there seems to be

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Speaker 4: an element of surprise I guess from JP Morgan's point

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Speaker 4: of view that the US Virgin Islands ended up proceeding

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Speaker 4: with that case.

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Speaker 1: The damaging revelations about the extent of JP Morgan's relationship

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Speaker 1: with Jeffrey Epstein sort of kept trickling out bit by bit.

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Speaker 1: How did Jamie Diamond and other officials at the bank

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Speaker 1: view that drip.

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Speaker 4: I think that it was a little bit mixed and

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Speaker 4: there was some sort of inflection points in the legal

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Speaker 4: strategy in this case. Nalas came out of the gate

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Speaker 4: very strongly. Was a lot of pretty compelling evidence, you know,

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Speaker 4: the contents of thousands of emails from inside JP Morgan

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Speaker 4: that gave us a bit of an insight into the

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Speaker 4: discussions that were going on around how to manage Jeffrey Epstein.

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Speaker 4: But then the JP Morgan came back a few months

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Speaker 4: later as his case was going on and playing out

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Speaker 4: in the court, and they got their own emails showing

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Speaker 4: what was going on with Jeffrey Epstein and different government

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Speaker 4: figures in the US Surgeon Arms as well from the

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Speaker 4: bank side. I think the like you mentioned, the drip

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Speaker 4: drip drip of different emails from Mary Urdos, from different

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Speaker 4: people sort of around Jamie Dimont, but not Jeremy Dummon himself,

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Speaker 4: was a bit of a public relations headache.

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Speaker 1: Diamond eventually was deposed over seven hours. What do we

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Speaker 1: know about that deposition?

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Speaker 4: Yes, that's right. I judge ordered that He put aside

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Speaker 4: two days to be deposed, but the deposition only ended

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Speaker 4: up taking one day, and it was lawyers for all

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Speaker 4: parts he is involved in this litigation, so lawyers for

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Speaker 4: the US Virgin Islands, lawyers for Jane Doe, which had

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Speaker 4: also reached another settlement with the bank, and lawyers for

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Speaker 4: former banker Jess Stay. It took about seven hours and

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Speaker 4: there was a three to four hundred page transcript of

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Speaker 4: the deposition that was released afterwards.

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Speaker 1: Did he talk about meetings with Epstein or communications with him.

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Speaker 2: No.

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Speaker 4: He was very very strong in his denials of really

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Speaker 4: knowing anything about Jeffrey Epstein. He said he never met him,

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Speaker 4: he never spoke to him, He didn't have any decision

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Speaker 4: making ability over his accounts or how he was managed

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Speaker 4: as a quiet. At one point during his deposition he said,

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Speaker 4: the first time I heard of the guy was in

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Speaker 4: twenty nineteen when he was charged with federal sex trafficking.

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Speaker 1: Charger Jess Daley tell us about that how that evolved.

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Speaker 4: When JP Morgan wrapped up its case with the US

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Speaker 4: Virgin Islands last week, it also reached a agreement with

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Speaker 4: Jess Staley. Jeff Daly was a long term executive at

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Speaker 4: JP Morgan. He had a very long standing professional relationship

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Speaker 4: and a friendship with Jeffrey Epstein. JP Morgan had sued

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Speaker 4: Stay a few months ago, arguing that he should be

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Speaker 4: held liable for any damages or boarded against it in

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Speaker 4: this broader Epstein litigation, saying that he vouched for Jeffrey

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Speaker 4: Epstein when he shouldn't have, and they didn't really know

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Speaker 4: the extent of Epstein's behavior because Staley was seeing his

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Speaker 4: praises constantly. So JP Morgan has reached some sort of

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Speaker 4: agreement with Staley to end that lawsuit, but the terms

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Speaker 4: of that settlement are confidential, so we don't know yet

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Speaker 4: if there was money involved or what the exact conditions were.

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Speaker 1: That's seventy five million dollars is much much less than

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Speaker 1: what the Virgin Islands initially asked for, that's right.

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Speaker 4: JP Morgan and the US version settled for seventy five million.

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Speaker 4: That includes twenty million dollars in attorney fees. Initially, based

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Speaker 4: on our reporting from different sources, the US Virgin Islands

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Speaker 4: had wanted three hundred million, which would have put it

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Speaker 4: on par with the settlement JP Morgan reached with Jane

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Speaker 4: Doe victims of Jeffrey Epstein earlier this year. A couple

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Speaker 4: of months ago, they said publicly that they wanted one

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Speaker 4: hundred and ninety million in penalties and fines from JP Morgan,

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Speaker 4: So seventy five million is considerably less. But I would

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Speaker 4: point out that the US Virgin Islands has gone to

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Speaker 4: great length to say, yes, seventy five million is less

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Speaker 4: than one hundred and ninety million that we'd asked for

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Speaker 4: a couple of months ago. But they claimed that JP

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Speaker 4: Morgan has agreed to make certain concessions internally anti trafficking

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Speaker 4: concession to make sure something like this doesn't happen again.

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Speaker 1: Seventy five million, and the bank generates that much revenue

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Speaker 1: in about five hours. So they had a very tough

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Speaker 1: strategy against the Virgin Islands. What made them decide to

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Speaker 1: settlef Finally, did.

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Speaker 4: You know we were approaching a decision on summary judgment.

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Speaker 4: So both sides had made their arguments to the judge

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Speaker 4: as to why he should ruin their favor before trial,

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Speaker 4: and I think that was always going to be a

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Speaker 4: sort of a good time for these parties to come

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Speaker 4: back to the negotiation table. We had heard that settlement

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Speaker 4: talks and mediation had broken down a number of times

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Speaker 4: over the past several months, and there'd been a lot

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Speaker 4: of embarrassing revelations to come out about JP Morgan and

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Speaker 4: the US Virgin Islands. So it seemed like both sides

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Speaker 4: were just ready to maybe stop the public relations blowback,

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Speaker 4: but they were both receiving and finally reach your conclusion, did.

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Speaker 1: All this in public take a toll on the reputation

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Speaker 1: of any of the upper echelon at JP Morgan or

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Speaker 1: the bank itself.

440
00:24:52,119 --> 00:24:54,760
Speaker 4: When we talk about Jamie Diamond, I think that he

441
00:24:55,119 --> 00:24:58,080
Speaker 4: has done a pretty good job at coming out of

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00:24:58,119 --> 00:25:02,159
Speaker 4: this unscathed. Always said that he had nothing to do

443
00:25:02,240 --> 00:25:05,840
Speaker 4: with JP Morgan's accounts. There was one sort of loan

444
00:25:06,000 --> 00:25:10,840
Speaker 4: email from a staffer inside the bank referring to Epstein's

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00:25:10,880 --> 00:25:14,160
Speaker 4: accounts and the status of them being subject to pending

446
00:25:14,200 --> 00:25:17,719
Speaker 4: Diamond review, but that didn't really go anywhere. But I

447
00:25:17,760 --> 00:25:22,440
Speaker 4: think that one of his trusted lieutenants, Mary Urdo's, it's

448
00:25:22,520 --> 00:25:26,560
Speaker 4: been a little bit more harmful for her reputation. She

449
00:25:26,680 --> 00:25:29,119
Speaker 4: had a lot more interaction with Jeffrey Epstein when he

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00:25:29,160 --> 00:25:31,800
Speaker 4: was alive. She had been to his house. She was

451
00:25:31,960 --> 00:25:34,919
Speaker 4: the executive that went around and fired him personally in

452
00:25:34,960 --> 00:25:36,120
Speaker 4: twenty thirteen.

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00:25:37,000 --> 00:25:40,520
Speaker 1: So is this the absolute end of the problems that

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00:25:40,600 --> 00:25:43,600
Speaker 1: JP Morgan Chase has had with Jeffrey Epstein.

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00:25:44,000 --> 00:25:47,280
Speaker 4: I'm sure they hope. So the judge still needs to

456
00:25:47,560 --> 00:25:51,840
Speaker 4: sign off on the Usgon Islands and JP Morgan settlement,

457
00:25:51,880 --> 00:25:55,679
Speaker 4: which will probably happen over the next several months. In

458
00:25:55,760 --> 00:25:59,320
Speaker 4: terms of whether we will see any more revelations about

459
00:25:59,560 --> 00:26:03,200
Speaker 4: how j Morgan handle Jeffrey Epstein, I don't think so.

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00:26:03,280 --> 00:26:06,440
Speaker 4: It's all been all the bad laundry has really been

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00:26:06,600 --> 00:26:08,440
Speaker 4: aired out over the past several months.

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00:26:08,560 --> 00:26:12,720
Speaker 1: Let's turn now to a trial that starts tomorrow. Sam

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00:26:12,760 --> 00:26:15,840
Speaker 1: Bankman freed. So prosecutors have called this one of the

464
00:26:15,880 --> 00:26:20,840
Speaker 1: biggest frauds in US history. What is he accused of exactly.

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00:26:20,960 --> 00:26:25,360
Speaker 4: That's right. He is accused of misappropriating billions of dollars

466
00:26:25,400 --> 00:26:29,880
Speaker 4: at FTX, which was one of the world's biggest cryptocurrency exchanges.

467
00:26:30,480 --> 00:26:33,639
Speaker 4: At the core of this case is an allegation that

468
00:26:33,920 --> 00:26:38,119
Speaker 4: he allowed Alimit research because of his crypto hedge funds

469
00:26:38,119 --> 00:26:42,160
Speaker 4: that he started in twenty seventeen to essentially draw down

470
00:26:42,320 --> 00:26:45,639
Speaker 4: on customer funds whenever it wanted and however it wanted.

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00:26:46,000 --> 00:26:49,520
Speaker 4: Those funds were then used allegedly on high risk trading

472
00:26:49,680 --> 00:26:53,439
Speaker 4: real estate purchases in the Bahamas, multi billion dollar loans

473
00:26:53,440 --> 00:26:56,919
Speaker 4: to executives. Sam Bang mcfred is pleaded not guilty to

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00:26:57,480 --> 00:26:59,720
Speaker 4: all seven of the fraud charges against him.

475
00:27:00,080 --> 00:27:02,199
Speaker 1: Do we know what his defense is going to be.

476
00:27:04,000 --> 00:27:07,520
Speaker 4: We have hints of what his defense is going to be. Generally,

477
00:27:08,240 --> 00:27:11,720
Speaker 4: defense teams hold those defense strategy pretty close to their

478
00:27:11,800 --> 00:27:15,520
Speaker 4: chest until the trial begins, but we've been able to

479
00:27:15,560 --> 00:27:19,240
Speaker 4: glean some signs of what it might shape up to

480
00:27:19,320 --> 00:27:22,960
Speaker 4: be from different legal filings. He may want to talk

481
00:27:23,000 --> 00:27:26,760
Speaker 4: about the presence of council, so that there were lawyers

482
00:27:26,760 --> 00:27:31,040
Speaker 4: at FTX and at outside firms advising FTX on many

483
00:27:31,080 --> 00:27:33,880
Speaker 4: of the things that prosecutors say were wrong. He may

484
00:27:33,960 --> 00:27:38,080
Speaker 4: also want to talk about cryptoregulation and laws in the

485
00:27:38,200 --> 00:27:42,760
Speaker 4: US because FTX was an international exchange and much of

486
00:27:42,760 --> 00:27:46,960
Speaker 4: them misappropriating was happening around the international exchange as opposed

487
00:27:46,960 --> 00:27:50,560
Speaker 4: to the US arm And he may also talk about

488
00:27:50,560 --> 00:27:53,280
Speaker 4: his intent and that he had acted in good faith

489
00:27:53,560 --> 00:27:56,560
Speaker 4: and he didn't have the unlawful intent That is a

490
00:27:56,640 --> 00:27:58,280
Speaker 4: key element improving fraud.

491
00:27:58,840 --> 00:28:01,040
Speaker 1: Who are the main witnesses for the prosecution.

492
00:28:01,760 --> 00:28:04,720
Speaker 4: Three main witnesses that everyone is really looking forward to

493
00:28:04,800 --> 00:28:08,119
Speaker 4: hearing from three former executives who were very close to

494
00:28:08,160 --> 00:28:12,080
Speaker 4: Sam Bankman Freed. That is Nishad Singh, Gary Wong, and

495
00:28:12,280 --> 00:28:17,520
Speaker 4: Caroline Ellison. Ellison was the head of Alameda Research and

496
00:28:17,600 --> 00:28:21,080
Speaker 4: she also dated Sam Bateman Freed on and off over

497
00:28:21,440 --> 00:28:25,320
Speaker 4: the past few years. So I think that she her

498
00:28:25,359 --> 00:28:28,359
Speaker 4: evidence in particular, is probably that will be keeping an

499
00:28:28,400 --> 00:28:32,159
Speaker 4: eye on because she will probably speak to the relationship

500
00:28:32,200 --> 00:28:36,040
Speaker 4: between Alimeda and FTX, talk about what Sam Bangman Freed

501
00:28:36,119 --> 00:28:39,200
Speaker 4: knew about Alimeter accessing customer funds.

502
00:28:39,800 --> 00:28:44,640
Speaker 1: And he's facing a judge who not only just recently

503
00:28:45,240 --> 00:28:47,880
Speaker 1: decided that he wasn't complying with the terms of his

504
00:28:48,000 --> 00:28:51,720
Speaker 1: bail and threw him into jail, but also has said

505
00:28:52,320 --> 00:28:55,400
Speaker 1: that he could be facing, if convicted, a very long

506
00:28:55,480 --> 00:28:57,200
Speaker 1: sentence exactly.

507
00:28:57,320 --> 00:29:02,480
Speaker 4: And the judge has really served a number of blows

508
00:29:02,520 --> 00:29:06,880
Speaker 4: to Sam Bateman Freed's defense. He has sort of hinted

509
00:29:06,880 --> 00:29:11,920
Speaker 4: at different defense strategies he might pursue in his pre

510
00:29:12,000 --> 00:29:16,760
Speaker 4: trial motions. The judge has ruled in favor of the

511
00:29:16,800 --> 00:29:20,360
Speaker 4: government in precluding a lot of those arguments, including the

512
00:29:20,600 --> 00:29:24,160
Speaker 4: presence and advice of Council Defense and making the argument

513
00:29:24,240 --> 00:29:28,000
Speaker 4: during the opening statements later this week. So it's been

514
00:29:28,160 --> 00:29:31,480
Speaker 4: an uphill battle for him, along with having his bow

515
00:29:31,680 --> 00:29:35,360
Speaker 4: revoked several weeks ago as well, that's been really difficult

516
00:29:35,560 --> 00:29:38,560
Speaker 4: for him to work on his case full time.

517
00:29:39,040 --> 00:29:41,880
Speaker 1: Jury selection starts tomorrow. I know you're covering the case

518
00:29:41,920 --> 00:29:44,120
Speaker 1: for us EVA, so we'll be checking back with you.

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00:29:44,280 --> 00:29:48,080
Speaker 1: Thanks so much. That's Bloomberg Legal Reporter Eva Benny Morrison,

520
00:29:48,480 --> 00:29:50,760
Speaker 1: and that's it for this edition of The Bloomberg Law Show.

521
00:29:51,120 --> 00:29:53,400
Speaker 1: Remember you can always get the latest legal news on

522
00:29:53,520 --> 00:29:57,800
Speaker 1: our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,

523
00:29:58,000 --> 00:30:02,120
Speaker 1: and at www dot bla Boomberg dot com, slash podcast

524
00:30:02,320 --> 00:30:05,240
Speaker 1: slash Law, and remember to tune into The Bloomberg Law

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00:30:05,320 --> 00:30:09,200
Speaker 1: Show every weeknight at ten pm Wall Street Time. I'm

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00:30:09,280 --> 00:30:11,720
Speaker 1: June Grosso, and you're listening to Bloomberg