1 00:00:03,200 --> 00:00:08,000 Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio. 2 00:00:08,760 --> 00:00:12,520 Speaker 2: The single greatest witch hunt of all time. 3 00:00:13,240 --> 00:00:16,840 Speaker 3: I have a rogue judge who rules that properties are 4 00:00:16,840 --> 00:00:20,640 Speaker 3: worth a tiny fraction one to one hundred, a tiny 5 00:00:20,680 --> 00:00:22,400 Speaker 3: fraction of what they actually are. 6 00:00:23,400 --> 00:00:26,239 Speaker 4: We have a racist attorney general who's a horror show. 7 00:00:26,400 --> 00:00:30,480 Speaker 5: Before his trial on civil fraud charges even began on Monday, 8 00:00:30,640 --> 00:00:33,599 Speaker 5: Donald Trump insulted the judge and the New York Attorney 9 00:00:33,640 --> 00:00:36,680 Speaker 5: General and call the case a scam, a sham, and 10 00:00:36,760 --> 00:00:40,320 Speaker 5: a witch hunt. The former president turned the Manhattan Courthouse 11 00:00:40,360 --> 00:00:43,760 Speaker 5: into his bully pulpit, with photo ops and sound bites 12 00:00:43,800 --> 00:00:47,320 Speaker 5: at every break. Inside the courtroom, Trump was on trial 13 00:00:47,360 --> 00:00:50,440 Speaker 5: for inflating the value of his assets by billions of 14 00:00:50,479 --> 00:00:53,760 Speaker 5: dollars a year to do banks and insurers, something he 15 00:00:53,840 --> 00:00:56,360 Speaker 5: denied repeatedly outside the courtroom. 16 00:00:56,720 --> 00:00:59,480 Speaker 4: The banks got back their money again. 17 00:00:59,560 --> 00:01:02,880 Speaker 3: There was the fall. There was never a problem. Everything 18 00:01:03,000 --> 00:01:04,959 Speaker 3: was perfect. There was no crime. 19 00:01:05,760 --> 00:01:06,920 Speaker 4: The crime is against me. 20 00:01:07,680 --> 00:01:10,880 Speaker 5: Trump left for Florida during the lunch break on Wednesday, 21 00:01:11,319 --> 00:01:15,240 Speaker 5: his departure duly noted by Attorney General Letitia James. 22 00:01:15,800 --> 00:01:19,039 Speaker 1: I will not be bullied, and so mister Trump is 23 00:01:19,040 --> 00:01:21,800 Speaker 1: no longer here that Donald Trump Show is over. This 24 00:01:21,959 --> 00:01:26,720 Speaker 1: was nothing more than a political stunt, a fun raising stop. 25 00:01:27,080 --> 00:01:30,600 Speaker 5: Joining me from the courthouse is Bloomberg Legal reporter Patricia Hurtado, 26 00:01:30,840 --> 00:01:33,919 Speaker 5: who's covering the trial and has witnessed the so called 27 00:01:34,120 --> 00:01:37,240 Speaker 5: Donald Trump Show. Tell us about it, Pat, So it's 28 00:01:37,280 --> 00:01:38,480 Speaker 5: been quite a spectacle. 29 00:01:38,640 --> 00:01:43,680 Speaker 4: The entire courthouse was cordoned off with barricades, and streets 30 00:01:43,680 --> 00:01:48,040 Speaker 4: were sealed off, and the press was basically held in 31 00:01:48,160 --> 00:01:52,200 Speaker 4: the courtroom hostage until President Trump came and went we 32 00:01:52,240 --> 00:01:55,880 Speaker 4: couldn't leave. During break, he would come out repeatedly and 33 00:01:55,960 --> 00:01:59,040 Speaker 4: literally a foot outside the front door of the main 34 00:01:59,360 --> 00:02:02,400 Speaker 4: entrance of the courtroom. He would hold a press conference 35 00:02:02,480 --> 00:02:06,160 Speaker 4: and basically make all kinds of comments. He would call 36 00:02:06,360 --> 00:02:10,240 Speaker 4: the New York Attorney General's lawsuit they quote unquote scam 37 00:02:10,400 --> 00:02:12,800 Speaker 4: and that she's a scam artist, and say kinds of 38 00:02:12,880 --> 00:02:16,959 Speaker 4: unflattering things about everybody and coman about the quality of evidence, 39 00:02:17,040 --> 00:02:20,040 Speaker 4: and how he has beautiful property that it should have 40 00:02:20,080 --> 00:02:23,000 Speaker 4: never been made public because it's a privately held company. 41 00:02:23,040 --> 00:02:25,480 Speaker 4: But now that everyone's seeing how much money and the 42 00:02:25,560 --> 00:02:29,279 Speaker 4: value of his assets is, they should be very impressed. 43 00:02:29,400 --> 00:02:33,080 Speaker 4: So it's quite bizarre what you're watching as a reporter 44 00:02:33,600 --> 00:02:36,160 Speaker 4: who normally knows that no one comes out and makes 45 00:02:36,160 --> 00:02:39,000 Speaker 4: comments a foot outside the door, and no one would 46 00:02:39,080 --> 00:02:42,560 Speaker 4: probably get away with it either, but he has until 47 00:02:42,680 --> 00:02:46,960 Speaker 4: finally he made some comments, posted them on truth social 48 00:02:47,120 --> 00:02:50,959 Speaker 4: sort of suggesting that the judge's law clerk, who is 49 00:02:51,080 --> 00:02:56,320 Speaker 4: advisor on the law was basically girlfriend of your Senator 50 00:02:56,440 --> 00:02:59,320 Speaker 4: Charles Schumer. So that happened. The judge issued a gag 51 00:02:59,400 --> 00:03:01,560 Speaker 4: order that no one was going to be posting things 52 00:03:01,600 --> 00:03:03,960 Speaker 4: on social media about his death. 53 00:03:04,240 --> 00:03:07,280 Speaker 5: Tell us about the opening statements and how the Attorney 54 00:03:07,320 --> 00:03:09,919 Speaker 5: General's office sort of laid out its case. 55 00:03:10,560 --> 00:03:13,560 Speaker 4: You know, it's not a criminal trial. There's no smoking 56 00:03:13,680 --> 00:03:18,200 Speaker 4: gun and drama and blood and guts and witnesses crying 57 00:03:18,280 --> 00:03:21,600 Speaker 4: on the stand. This is a very dry civil trial 58 00:03:21,760 --> 00:03:24,400 Speaker 4: that has to do about the valuation of assets. And 59 00:03:24,440 --> 00:03:26,960 Speaker 4: it's also a bench trial, so everything is sort of 60 00:03:26,960 --> 00:03:29,920 Speaker 4: at a higher plane. It's not for the common man 61 00:03:30,040 --> 00:03:33,480 Speaker 4: who might be sitting on the jury. It's basically being 62 00:03:33,720 --> 00:03:36,320 Speaker 4: told to the judge who's already made a ruling of 63 00:03:36,440 --> 00:03:40,320 Speaker 4: finding Trump liable for fraud on one of the seven planes. 64 00:03:40,560 --> 00:03:43,560 Speaker 4: So they laid out their case. They basically assert the 65 00:03:43,560 --> 00:03:46,440 Speaker 4: same thing that they allegend the lawsuit. And I'll give 66 00:03:46,480 --> 00:03:50,480 Speaker 4: you one example, Seventh Springs, which is in Bedford, New York, 67 00:03:50,600 --> 00:03:54,280 Speaker 4: and it's a beautiful piece of property and it's wooded, 68 00:03:54,440 --> 00:03:57,760 Speaker 4: but apparently there were easements on the property because it's 69 00:03:57,920 --> 00:04:01,880 Speaker 4: protected wilderness, so they could not develop. But yet the 70 00:04:01,880 --> 00:04:05,960 Speaker 4: Trump companies had assessed the value of this property and 71 00:04:06,080 --> 00:04:10,200 Speaker 4: they had said there were seven mansions each were thirty 72 00:04:10,200 --> 00:04:14,040 Speaker 4: five million. So they valued this Seven Springs at one 73 00:04:14,120 --> 00:04:17,360 Speaker 4: hundred and sixty one million. And the New York Attorney 74 00:04:17,400 --> 00:04:21,760 Speaker 4: General today was asking Jeffrey mcconnie, wait a minute, there 75 00:04:21,760 --> 00:04:24,640 Speaker 4: were no houses there. Yeah, so this was like it's 76 00:04:24,640 --> 00:04:27,320 Speaker 4: for ten things. And they still assessed it as one 77 00:04:27,400 --> 00:04:30,559 Speaker 4: hundred and sixty one million, even knowing that they could 78 00:04:30,600 --> 00:04:33,760 Speaker 4: never put seven mansions on that property. 79 00:04:34,160 --> 00:04:38,200 Speaker 5: And in the defense opening statements, did they make arguments 80 00:04:38,360 --> 00:04:42,840 Speaker 5: about valuations that the judge already rejected in his order 81 00:04:43,320 --> 00:04:46,680 Speaker 5: recall them fantasy rather than reality. 82 00:04:46,839 --> 00:04:50,000 Speaker 4: Yes, a lot of it. The judges already sanctioned. Trump's 83 00:04:50,040 --> 00:04:54,000 Speaker 4: lawyers were repeating arguments He's already rejected, and the judge 84 00:04:54,000 --> 00:04:56,600 Speaker 4: would interrupt him and say, I've already rejected that argument, 85 00:04:56,640 --> 00:04:59,600 Speaker 4: and they would continue, I always tell my friends, you know, 86 00:05:00,080 --> 00:05:02,839 Speaker 4: or isn't as dramatic as you see it on TV. 87 00:05:03,240 --> 00:05:06,080 Speaker 4: You know, you know, most of the time they behave 88 00:05:06,200 --> 00:05:09,480 Speaker 4: themselves and there's no melodrama. But in this case, it 89 00:05:09,560 --> 00:05:12,960 Speaker 4: seemed like his legal team was basically playing for the 90 00:05:13,040 --> 00:05:15,280 Speaker 4: audience of one who happened to be sitting there as 91 00:05:15,279 --> 00:05:18,160 Speaker 4: a former forty fifth president of the United States. 92 00:05:18,520 --> 00:05:21,960 Speaker 5: And during the witness testimony, were there several tense moments 93 00:05:22,080 --> 00:05:23,480 Speaker 5: or dramatic moments. 94 00:05:23,880 --> 00:05:27,160 Speaker 4: There's been several moments where there's almost the drama that 95 00:05:27,240 --> 00:05:30,520 Speaker 4: you don't expect, the histrionics you don't expect, the play 96 00:05:30,560 --> 00:05:32,880 Speaker 4: acting you don't expect, And there's been a little bit 97 00:05:32,920 --> 00:05:34,919 Speaker 4: of that from the defense cable. 98 00:05:35,120 --> 00:05:35,320 Speaker 5: You know. 99 00:05:35,400 --> 00:05:39,599 Speaker 4: At one point, Donald Fender is the former Mazar's accountant, 100 00:05:39,720 --> 00:05:43,800 Speaker 4: longtime accountants for Donald Trump's company. He would submit the 101 00:05:43,960 --> 00:05:48,440 Speaker 4: statements of financial condition, and he was basically relying, as 102 00:05:48,640 --> 00:05:53,880 Speaker 4: is typical on papers and submissions put forward by the 103 00:05:53,920 --> 00:05:57,120 Speaker 4: Trump organization. He said, we don't go and drill down 104 00:05:57,160 --> 00:05:59,240 Speaker 4: and find out if the numbers are accurate. We rely 105 00:05:59,360 --> 00:06:02,920 Speaker 4: on the client to give us accurate information. So Trump's 106 00:06:02,960 --> 00:06:06,159 Speaker 4: lawyers were basically cross examining him and it's like when 107 00:06:06,160 --> 00:06:09,480 Speaker 4: did you stop beating your wife type questions, and the 108 00:06:09,600 --> 00:06:13,120 Speaker 4: judge interrupted one of the Trump lawyers and said, I'm sorry, 109 00:06:13,200 --> 00:06:16,160 Speaker 4: you know, mister Bender is not on trial here, and 110 00:06:16,200 --> 00:06:20,480 Speaker 4: they we reciferously object and there were four lawyers me 111 00:06:20,560 --> 00:06:23,720 Speaker 4: at the Trump table and all four of them stood up, 112 00:06:23,720 --> 00:06:26,479 Speaker 4: I object, I object, I object, I object, and the 113 00:06:26,560 --> 00:06:30,279 Speaker 4: judges you know, your objection is noted. And he basically said, 114 00:06:30,360 --> 00:06:33,040 Speaker 4: who you playing for? Are you playing for the audience? 115 00:06:33,200 --> 00:06:33,800 Speaker 4: The media? 116 00:06:34,120 --> 00:06:34,800 Speaker 2: What is this for? 117 00:06:35,200 --> 00:06:38,400 Speaker 4: Because you know, it was way out of bounds from 118 00:06:38,400 --> 00:06:41,679 Speaker 4: what you expect a typical civil flaw trial, and people 119 00:06:41,760 --> 00:06:44,960 Speaker 4: misbehave and people get emotional. I can understand that, but 120 00:06:45,360 --> 00:06:48,719 Speaker 4: it was a little unusual. And there was another time 121 00:06:48,920 --> 00:06:52,440 Speaker 4: the same witness, Donald Bender, has a Brooklyn accent, and 122 00:06:52,480 --> 00:06:55,000 Speaker 4: he tends to mutter and drop his voice, so we're 123 00:06:55,040 --> 00:06:58,400 Speaker 4: straining to hear in this very large courtroom and he 124 00:06:58,440 --> 00:07:00,840 Speaker 4: wouldn't speak into the mic, and one of the lawyers 125 00:07:00,880 --> 00:07:04,039 Speaker 4: for Trump stood up and said, I'm sorry, your honor, 126 00:07:04,200 --> 00:07:07,960 Speaker 4: could the witness speak into the microphone? And Trump was 127 00:07:08,200 --> 00:07:12,320 Speaker 4: very animated and he says, I can't hear I can't 128 00:07:12,360 --> 00:07:15,120 Speaker 4: hear him, and you know, it's kind of unusual that 129 00:07:15,160 --> 00:07:17,480 Speaker 4: the defendant would just shout it out in the middle 130 00:07:17,520 --> 00:07:20,520 Speaker 4: of a courtroom. And then Trump started mugging like, you know, 131 00:07:20,680 --> 00:07:22,559 Speaker 4: I don't know, I can't hear a word he's saying. 132 00:07:22,960 --> 00:07:25,640 Speaker 4: And then he started pointing at his ear. So there's 133 00:07:25,680 --> 00:07:28,880 Speaker 4: been this tide show, you know between the security that's 134 00:07:28,920 --> 00:07:32,960 Speaker 4: extraordinary for a courtroom where you're held hostage and you 135 00:07:33,000 --> 00:07:36,640 Speaker 4: can't get up to leave until he leaves. And then 136 00:07:36,680 --> 00:07:39,800 Speaker 4: the defendant is standing outside ten minutes and having a 137 00:07:39,840 --> 00:07:43,560 Speaker 4: press conference and you can't leave until the security says 138 00:07:43,600 --> 00:07:44,240 Speaker 4: you can leave. 139 00:07:44,920 --> 00:07:46,360 Speaker 5: Is Trump going to testify? 140 00:07:46,880 --> 00:07:49,560 Speaker 4: Oh, yes, he will testify. Now that was a surprise 141 00:07:49,640 --> 00:07:53,520 Speaker 4: that Tis James wants him to testify. Originally he took 142 00:07:53,840 --> 00:07:57,400 Speaker 4: the fifth like four hundred times or so before he 143 00:07:57,520 --> 00:08:02,160 Speaker 4: got sued, and then he got dude. And as you know, June, 144 00:08:02,240 --> 00:08:04,600 Speaker 4: if you invoke the fifth the judge can take an 145 00:08:04,640 --> 00:08:08,680 Speaker 4: adverse inference over your refusal to answer. It could be 146 00:08:08,760 --> 00:08:11,680 Speaker 4: counted against you as like a default that you have 147 00:08:11,840 --> 00:08:14,800 Speaker 4: not responded, so therefore I'm going to find against you. 148 00:08:15,160 --> 00:08:17,040 Speaker 4: So it wouldn't have helped Trump if he had taken 149 00:08:17,040 --> 00:08:19,480 Speaker 4: the fifth so he did get supposed, and we have 150 00:08:19,640 --> 00:08:23,120 Speaker 4: some five hundred pages of his deposition. So now she 151 00:08:23,280 --> 00:08:26,040 Speaker 4: wants him on the stand. She's going to call Eric Trump, 152 00:08:26,360 --> 00:08:29,360 Speaker 4: She's going to call Donald Trump Junior. And that's later 153 00:08:29,440 --> 00:08:33,679 Speaker 4: on in the trial. Next week, we are expecting Ellen Weiselberg, 154 00:08:34,080 --> 00:08:37,920 Speaker 4: who is the former longtime chief financial officer for Trump. 155 00:08:38,200 --> 00:08:42,240 Speaker 4: And as we all remember, he pleaded guilty in August 156 00:08:42,240 --> 00:08:46,000 Speaker 4: of twenty twenty two and he went to prison for 157 00:08:46,440 --> 00:08:50,160 Speaker 4: I think like months three months time after being convicted 158 00:08:50,360 --> 00:08:52,560 Speaker 4: of tax fuauds and pat. 159 00:08:52,240 --> 00:08:56,160 Speaker 5: Is Donald Trump's New York real estate empire really at 160 00:08:56,240 --> 00:08:56,760 Speaker 5: stake here. 161 00:08:57,280 --> 00:08:59,199 Speaker 4: Well, it's still up in the air because when the 162 00:08:59,240 --> 00:09:03,000 Speaker 4: judge issued US judgment Rotion two weeks ago, he was 163 00:09:03,040 --> 00:09:07,400 Speaker 4: basically suggesting the dissolve the LLC's and that was not 164 00:09:07,559 --> 00:09:10,360 Speaker 4: with the New York Attorney Generals who was asking for 165 00:09:11,000 --> 00:09:16,200 Speaker 4: Also in this case, James said he overvalued assets and underpaid. 166 00:09:16,480 --> 00:09:19,400 Speaker 4: So she is speaking at least two hundred and fifty 167 00:09:19,520 --> 00:09:23,640 Speaker 4: million dollars in damages from Trump. So the judge is 168 00:09:23,679 --> 00:09:25,640 Speaker 4: going to issue a bench rolling at the end of the. 169 00:09:25,640 --> 00:09:29,320 Speaker 5: Trial, and on Friday afternoon, an appellate judge refused to 170 00:09:29,360 --> 00:09:33,520 Speaker 5: delay this trial while Trump appeals that summary judgment ruling, 171 00:09:33,720 --> 00:09:36,200 Speaker 5: but he did put that ruling, which could strip Trump 172 00:09:36,280 --> 00:09:39,720 Speaker 5: of some of his marquee properties, on hold. Thanks so 173 00:09:39,800 --> 00:09:42,440 Speaker 5: much for giving us an inside look at the trial, Patty. 174 00:09:42,720 --> 00:09:46,480 Speaker 5: That's Bloomberg legal reporter Patricia Hurtado. I'm June Grosso, and 175 00:09:46,520 --> 00:09:47,600 Speaker 5: you're listening to Bloomberg. 176 00:09:48,360 --> 00:09:50,480 Speaker 6: I had a duty. I had a duty to all 177 00:09:50,520 --> 00:09:53,520 Speaker 6: of our stakeholders, to our customers, our freder is. I 178 00:09:53,520 --> 00:09:55,760 Speaker 6: had to do each our employees, to our investors, and 179 00:09:56,400 --> 00:09:59,600 Speaker 6: to the regulators of the world to do right by them, 180 00:09:59,600 --> 00:10:01,560 Speaker 6: to make sure the right things happened to the company. 181 00:10:01,559 --> 00:10:04,880 Speaker 6: And clearly I'd do a good job of that. Clearly 182 00:10:05,000 --> 00:10:10,000 Speaker 6: I made a lot of mistakes or things I would 183 00:10:10,040 --> 00:10:12,760 Speaker 6: give anything to be able to do over again. I 184 00:10:12,880 --> 00:10:16,000 Speaker 6: didn't ever try to commit fraud on anyone. 185 00:10:16,360 --> 00:10:20,240 Speaker 5: Sam Bankman Freed took responsibility for the stunning collapse of 186 00:10:20,280 --> 00:10:24,200 Speaker 5: his multi billion dollar FTX crypto empire in a sort 187 00:10:24,200 --> 00:10:29,200 Speaker 5: of apology tour last November, portraying himself as a well intentioned, 188 00:10:29,480 --> 00:10:34,240 Speaker 5: perhaps happless chief executive, someone who made terrible mistakes but 189 00:10:34,480 --> 00:10:39,200 Speaker 5: never knowingly committed fraud. Manhattan Federal prosecutors didn't buy it 190 00:10:39,520 --> 00:10:42,840 Speaker 5: and charged him a month later with orchestrating a massive 191 00:10:42,920 --> 00:10:47,240 Speaker 5: fraud and bilking investors and customers out of billions of dollars. 192 00:10:47,600 --> 00:10:50,600 Speaker 5: Now bankman Freed has to try to convince a jury 193 00:10:50,800 --> 00:10:54,920 Speaker 5: that his crypto empire wasn't built on fraud. Joining me 194 00:10:55,000 --> 00:10:59,199 Speaker 5: is Joshua and Ftalis of Palace Partners, a former prosecutor 195 00:10:59,240 --> 00:11:03,800 Speaker 5: in the Manhattan Attorney's Office. In opening statements, the prosecutor 196 00:11:03,840 --> 00:11:07,600 Speaker 5: painted this picture of bankman Freed as calculating a criminal 197 00:11:07,679 --> 00:11:12,760 Speaker 5: mastermind who used investor deposits as a personal bank account. 198 00:11:13,040 --> 00:11:15,080 Speaker 5: What does the prosecution have to prove here? 199 00:11:15,480 --> 00:11:18,679 Speaker 7: The prosecution's job is actually, I think simpler than all 200 00:11:18,679 --> 00:11:21,280 Speaker 7: of us think. They really just need to show that 201 00:11:21,400 --> 00:11:25,520 Speaker 7: bankman Freed lied to his investors, lied to his customers, 202 00:11:25,760 --> 00:11:28,680 Speaker 7: and stole the money. So it may take a long time, 203 00:11:28,760 --> 00:11:30,720 Speaker 7: there may be a lot of documents and testimony, but 204 00:11:30,840 --> 00:11:33,600 Speaker 7: in the end it's a case about lies, greed, theft. 205 00:11:33,840 --> 00:11:36,320 Speaker 7: They want to talk about the crime as a crime 206 00:11:36,320 --> 00:11:40,880 Speaker 7: of embezzlement, misappropriation, and lies. They want to avoid getting 207 00:11:40,920 --> 00:11:44,880 Speaker 7: into the nuances of crypto, how the technology worked and 208 00:11:44,920 --> 00:11:47,599 Speaker 7: getting the jurors lost or bored. Now that may be 209 00:11:47,679 --> 00:11:49,839 Speaker 7: a strategy the defense moves to because they want to 210 00:11:49,880 --> 00:11:53,240 Speaker 7: make this sound complicated and something that got out of control. 211 00:11:54,320 --> 00:11:58,200 Speaker 5: So bankman Freed's lawyers, in opening statements, said the prosecutor 212 00:11:58,559 --> 00:12:02,120 Speaker 5: had portrayed their client as a cartoon villain rather than 213 00:12:02,160 --> 00:12:05,560 Speaker 5: the math nerd he truly was, and that Sam didn't 214 00:12:05,600 --> 00:12:09,840 Speaker 5: intend to defraud anyone, There was no theft. What does 215 00:12:09,880 --> 00:12:12,320 Speaker 5: their opening tell you about their defense strategy. 216 00:12:12,720 --> 00:12:14,960 Speaker 7: I think they're setting up what is often the fight 217 00:12:15,040 --> 00:12:17,400 Speaker 7: in a white collar case, which is did the defendant 218 00:12:17,480 --> 00:12:18,160 Speaker 7: intend to do? 219 00:12:18,520 --> 00:12:19,160 Speaker 8: What happened? 220 00:12:19,440 --> 00:12:21,559 Speaker 7: The facts are probably not going to be too much 221 00:12:21,559 --> 00:12:24,640 Speaker 7: in dispute, where did the money go? How is it used? 222 00:12:24,720 --> 00:12:26,920 Speaker 7: The question is, as the defense is setting it up, 223 00:12:27,000 --> 00:12:29,000 Speaker 7: did he intend to do something wrong? Did he think 224 00:12:29,040 --> 00:12:31,800 Speaker 7: he was committing a crime? And I think what we're 225 00:12:31,840 --> 00:12:34,480 Speaker 7: saying here is he didn't intend to do anything wrong, 226 00:12:34,800 --> 00:12:38,160 Speaker 7: And the government is exaggerating by, as they said, painting 227 00:12:38,240 --> 00:12:41,520 Speaker 7: him as some cartoon villain. They're stretching, and they're asking 228 00:12:41,559 --> 00:12:43,800 Speaker 7: the jury to sort of hold judgment as to what 229 00:12:43,880 --> 00:12:46,000 Speaker 7: happened and say the government is really not giving you 230 00:12:46,040 --> 00:12:48,200 Speaker 7: a full picture Three of. 231 00:12:48,080 --> 00:12:51,560 Speaker 5: His top executives have pleaded guilty to fraud and agreed 232 00:12:51,600 --> 00:12:56,840 Speaker 5: to cooperate, including his on again, off again girlfriend Caroline Ellison, 233 00:12:56,840 --> 00:13:00,640 Speaker 5: who ran the crypto hedge fund Alometer Research, and she's 234 00:13:00,679 --> 00:13:04,600 Speaker 5: expected to be the state's star witness. The prosecutors portrayed 235 00:13:04,600 --> 00:13:08,680 Speaker 5: her as bankman Freed's closest confidant, while the defense appeared 236 00:13:08,720 --> 00:13:11,920 Speaker 5: to try to shift the blame to her, saying that 237 00:13:12,040 --> 00:13:14,920 Speaker 5: you know, he urged her to hedge their exposure to 238 00:13:14,960 --> 00:13:18,600 Speaker 5: further losses and she just didn't do it. How much 239 00:13:18,640 --> 00:13:21,080 Speaker 5: does the prosecution's case depend upon Allison. 240 00:13:21,520 --> 00:13:24,080 Speaker 7: I don't think it rises and falls on Allison. I 241 00:13:24,120 --> 00:13:26,840 Speaker 7: think what the government is doing is using all three 242 00:13:26,880 --> 00:13:31,439 Speaker 7: of these cooperating witnesses to corroborate what I expect that documents, emails, 243 00:13:31,520 --> 00:13:34,440 Speaker 7: the Twitter, or post bank records will show that the 244 00:13:34,480 --> 00:13:37,320 Speaker 7: stories for these cooperating witnesses, including Alison, match up with 245 00:13:37,320 --> 00:13:39,720 Speaker 7: what the documents show. I think the drama will be 246 00:13:39,800 --> 00:13:42,480 Speaker 7: the cooperating witnesses. It's obviously a lot more interesting to 247 00:13:42,520 --> 00:13:44,880 Speaker 7: hear from live witnesses who are in the mix, so 248 00:13:44,960 --> 00:13:47,640 Speaker 7: to speak, than to have someone walk you through how 249 00:13:47,640 --> 00:13:49,280 Speaker 7: the money moved how will. 250 00:13:49,120 --> 00:13:54,040 Speaker 5: His romantic relationship with Ellison play in either in the 251 00:13:54,040 --> 00:13:57,440 Speaker 5: prosecutions direct or the defense's cross So I. 252 00:13:57,440 --> 00:14:00,200 Speaker 7: Think the government's going to try to exploit that by saying, 253 00:14:00,400 --> 00:14:02,680 Speaker 7: this is someone who was as close as they get 254 00:14:02,760 --> 00:14:05,360 Speaker 7: to the defendant, and that's the type of person you 255 00:14:05,440 --> 00:14:07,440 Speaker 7: commit a crime with. You don't commit a crime with 256 00:14:07,800 --> 00:14:10,120 Speaker 7: a random person on the street. You do it with 257 00:14:10,440 --> 00:14:13,480 Speaker 7: someone you trust, including a girlfriend, and that's how you 258 00:14:13,559 --> 00:14:15,280 Speaker 7: know that she was in on it and she's telling 259 00:14:15,320 --> 00:14:16,960 Speaker 7: you the truth. The defense, as you said, is going 260 00:14:17,000 --> 00:14:18,920 Speaker 7: to try to shift the blame and say this really 261 00:14:19,160 --> 00:14:22,640 Speaker 7: wasn't bank on Fried's fault. This was his girlfriend who 262 00:14:22,760 --> 00:14:25,280 Speaker 7: is now trying to get a good deal and shifting 263 00:14:25,320 --> 00:14:27,920 Speaker 7: the blame to him, and she didn't follow his instruction 264 00:14:28,040 --> 00:14:30,800 Speaker 7: the hedge. So the debate's going to be who's telling 265 00:14:30,800 --> 00:14:33,200 Speaker 7: the truth. Is it the government's portrayal as she's an 266 00:14:33,240 --> 00:14:35,560 Speaker 7: honestbroke or the facts, or is it bankern Freed's trying 267 00:14:35,560 --> 00:14:38,320 Speaker 7: to impeach her story and saying she's leaving out the 268 00:14:38,360 --> 00:14:41,320 Speaker 7: fact that bankmin Freed had given instructions which were apparently 269 00:14:41,360 --> 00:14:42,240 Speaker 7: ignored in his telling. 270 00:14:43,000 --> 00:14:45,840 Speaker 5: The biggest question, as always in criminal cases, is whether 271 00:14:45,880 --> 00:14:49,520 Speaker 5: the defendant will take the stand. Bankman Freed is not 272 00:14:49,640 --> 00:14:52,440 Speaker 5: like other defendants in that he talked and talked and 273 00:14:52,480 --> 00:14:56,120 Speaker 5: talked before and after his arrest. So it's got a 274 00:14:56,160 --> 00:14:59,200 Speaker 5: lot of explaining to do if he gets on the stand. 275 00:14:59,280 --> 00:15:01,520 Speaker 5: But do you think he's the type who may want 276 00:15:01,560 --> 00:15:02,400 Speaker 5: to take the stand. 277 00:15:03,160 --> 00:15:05,040 Speaker 7: I think he's going to take the stand, and I 278 00:15:05,040 --> 00:15:07,600 Speaker 7: think he's more likely than the average defendant to take 279 00:15:07,600 --> 00:15:10,760 Speaker 7: the stand. As you mentioned, he's talked a lot, and 280 00:15:10,800 --> 00:15:12,960 Speaker 7: the government has a lot of material apparently to work with, 281 00:15:13,320 --> 00:15:16,080 Speaker 7: so he may be tempted to try to explain what 282 00:15:16,160 --> 00:15:18,960 Speaker 7: he meant. The government and the witnesses they call are 283 00:15:19,080 --> 00:15:21,480 Speaker 7: going to say that the evidence shows that he intended 284 00:15:21,520 --> 00:15:24,240 Speaker 7: to commit a crime, and bangruent Freed may be tempted, 285 00:15:24,240 --> 00:15:25,920 Speaker 7: and it may be a good strategy to get up 286 00:15:25,920 --> 00:15:27,800 Speaker 7: there and say, listen, As his lawyers said in their 287 00:15:27,800 --> 00:15:31,000 Speaker 7: opening statements, this company went from zero to a million 288 00:15:31,160 --> 00:15:33,480 Speaker 7: in a couple of years they were building the airplane 289 00:15:33,480 --> 00:15:36,040 Speaker 7: in the air and he's going to need to explain why. 290 00:15:36,080 --> 00:15:37,760 Speaker 7: That means the mistakes were made, but he didn't intend 291 00:15:37,800 --> 00:15:38,600 Speaker 7: to do anything wrong. 292 00:15:38,880 --> 00:15:39,080 Speaker 2: Yeah. 293 00:15:39,120 --> 00:15:41,680 Speaker 5: I wonder if at some point it looks like everyone 294 00:15:42,080 --> 00:15:45,040 Speaker 5: got a deal except for him. So what it seemed 295 00:15:45,040 --> 00:15:47,840 Speaker 5: to the jury like, well, he's the only one taking 296 00:15:47,880 --> 00:15:48,920 Speaker 5: a blame for everything. 297 00:15:49,120 --> 00:15:51,560 Speaker 7: The fedant will certainly argue that, and I think that's 298 00:15:51,560 --> 00:15:54,280 Speaker 7: one of the things that the government needs to deflect. 299 00:15:54,480 --> 00:15:57,440 Speaker 7: The defense, I expect will argue, Listen, everyone here is 300 00:15:57,520 --> 00:15:59,840 Speaker 7: planting to finger at him. It's not fair for him 301 00:16:00,000 --> 00:16:00,640 Speaker 7: take the fall. 302 00:16:00,840 --> 00:16:04,600 Speaker 5: Another line of defense, which you referred to earlier, is 303 00:16:04,640 --> 00:16:07,440 Speaker 5: to put the blame on the collapse of the crypto industry. 304 00:16:07,720 --> 00:16:10,680 Speaker 5: In opening statements, his attorney said that the rise and 305 00:16:10,760 --> 00:16:14,840 Speaker 5: fall of FTX mirrored the wider crypto industry, and this 306 00:16:14,960 --> 00:16:18,160 Speaker 5: case in many ways is about crypto from twenty seventeen 307 00:16:18,240 --> 00:16:20,640 Speaker 5: to twenty twenty two. So you think they'll try to 308 00:16:20,680 --> 00:16:21,640 Speaker 5: shift the blame there. 309 00:16:22,360 --> 00:16:24,040 Speaker 7: Yes, I think in a number of ways what you 310 00:16:24,040 --> 00:16:26,320 Speaker 7: alluded to earlier, which is is he being asked to 311 00:16:26,360 --> 00:16:28,680 Speaker 7: carry the bag for the fact that the market collapsed. 312 00:16:29,000 --> 00:16:32,400 Speaker 7: Is that unfair? And second, trying to argue that the 313 00:16:32,480 --> 00:16:36,040 Speaker 7: rules were being written for cryptocurrency as the business was 314 00:16:36,080 --> 00:16:39,000 Speaker 7: growing and as this crime allegedly took place, So it's 315 00:16:39,000 --> 00:16:41,280 Speaker 7: not fair to say he committed a crime or he 316 00:16:41,280 --> 00:16:43,320 Speaker 7: didn't intend to because there were no rules. And then 317 00:16:43,360 --> 00:16:45,840 Speaker 7: the third is sort of the I asked other people 318 00:16:45,880 --> 00:16:47,640 Speaker 7: to do things that they didn't listen to me, and 319 00:16:47,680 --> 00:16:51,160 Speaker 7: that's how a growing business, including a cryptocurrency works, And 320 00:16:51,200 --> 00:16:54,000 Speaker 7: the strategy will be to confuse the jurors, or at 321 00:16:54,080 --> 00:16:56,040 Speaker 7: least one of them, as he said, to just try 322 00:16:56,080 --> 00:16:57,640 Speaker 7: to hang the jury. I don't think this is a 323 00:16:57,680 --> 00:16:59,920 Speaker 7: case the defense orders are thinking an acquittal. Is like, 324 00:17:00,360 --> 00:17:02,200 Speaker 7: I think that they're going for a hung jury. 325 00:17:02,880 --> 00:17:07,280 Speaker 5: Prosecutors have these millions of pages of digital evidence, texts 326 00:17:07,320 --> 00:17:11,120 Speaker 5: and emails and snippets of computer code, and they have 327 00:17:11,440 --> 00:17:15,639 Speaker 5: the three witnesses who turned state's evidence, and so it 328 00:17:15,680 --> 00:17:19,119 Speaker 5: seems like such an uphill battle for bankman freed. So 329 00:17:19,200 --> 00:17:21,240 Speaker 5: you think that the best he could hope for would 330 00:17:21,280 --> 00:17:22,240 Speaker 5: be a hung jury. 331 00:17:22,680 --> 00:17:24,960 Speaker 7: Yeah, I mean, I think trying to convince twelve people 332 00:17:25,040 --> 00:17:27,680 Speaker 7: you didn't do it is much harder, obviously than convincing 333 00:17:27,720 --> 00:17:30,280 Speaker 7: one person that there's a doubt. And when you have 334 00:17:30,359 --> 00:17:32,560 Speaker 7: that much evidence, you are really playing to the lowest 335 00:17:32,560 --> 00:17:35,520 Speaker 7: common denominator there as opposed to the government, which has 336 00:17:35,560 --> 00:17:38,440 Speaker 7: this huge burden of convincing twelve people that the defendant 337 00:17:38,680 --> 00:17:41,560 Speaker 7: is guilty and That's why I think the government will 338 00:17:41,600 --> 00:17:43,960 Speaker 7: pursue sort of a clear narrative and the defense will 339 00:17:43,960 --> 00:17:46,720 Speaker 7: try to make this about the confusing world of crypto. 340 00:17:46,680 --> 00:17:50,080 Speaker 5: Potential prison term. We're hearing more than a century if 341 00:17:50,119 --> 00:17:54,439 Speaker 5: convicted on all charges. But what's a more likely sentence here? 342 00:17:54,800 --> 00:17:57,800 Speaker 7: There's something called the sentencing guidelines, which is an advisory 343 00:17:57,880 --> 00:18:01,360 Speaker 7: guideline range Judge Caplin lobs to consider if the defendant's convicted. 344 00:18:01,440 --> 00:18:04,600 Speaker 7: I imagine his guidelines will be life in prison. The reality 345 00:18:04,680 --> 00:18:07,400 Speaker 7: is that getting that much time is very rare. Sort 346 00:18:07,400 --> 00:18:10,159 Speaker 7: of burning made off is the closest analog in that regard, 347 00:18:10,200 --> 00:18:11,879 Speaker 7: and that's just sort of a different type of crime 348 00:18:11,960 --> 00:18:13,960 Speaker 7: with a Ponzi scheme as opposed to sort of an 349 00:18:13,960 --> 00:18:16,760 Speaker 7: embezzlement case. It's hard to predict. It really depends on 350 00:18:16,760 --> 00:18:20,680 Speaker 7: whether he testifies, and if he lies, the danger there 351 00:18:20,760 --> 00:18:23,639 Speaker 7: is he could enhance the arguments that the government have 352 00:18:23,920 --> 00:18:25,760 Speaker 7: that this is someone who needs to be punished. He 353 00:18:25,800 --> 00:18:27,639 Speaker 7: didn't just defend himself. He got in front of a 354 00:18:27,720 --> 00:18:30,560 Speaker 7: jury and lied, and that could really put his exposure higher. 355 00:18:30,880 --> 00:18:34,040 Speaker 5: And how important is it to the Manhattan US Attorney's 356 00:18:34,080 --> 00:18:35,800 Speaker 5: office to get a conviction. 357 00:18:35,520 --> 00:18:39,080 Speaker 7: Here it's obviously important. I mean, Damian william is the 358 00:18:39,160 --> 00:18:41,760 Speaker 7: US attorney, he's a friend, and he's a great prosecutor, 359 00:18:41,840 --> 00:18:44,120 Speaker 7: and I would say he treats all of his children equally. 360 00:18:44,200 --> 00:18:46,560 Speaker 7: But this is clearly an important case because of the 361 00:18:46,560 --> 00:18:49,199 Speaker 7: press attention and because of the deterren effect that it 362 00:18:49,240 --> 00:18:51,560 Speaker 7: could have in the industry. So I think it's important 363 00:18:51,600 --> 00:18:53,720 Speaker 7: they win. But I think that the government always wants 364 00:18:53,760 --> 00:18:55,920 Speaker 7: to win because they bring cases that they think are 365 00:18:55,960 --> 00:18:58,840 Speaker 7: worthy of prosecution and they think that a conviction is 366 00:18:58,880 --> 00:19:01,280 Speaker 7: the right result. There's a little bit of a microscope 367 00:19:01,280 --> 00:19:03,880 Speaker 7: because of the press attention, so I think that adds 368 00:19:03,880 --> 00:19:05,240 Speaker 7: a little bit of pressure for everyone. 369 00:19:05,520 --> 00:19:07,720 Speaker 5: There's certainly a lot to watch in this case. Thanks 370 00:19:07,760 --> 00:19:11,640 Speaker 5: so much, josh. That's Joshua En f Talis of Palace Partners. 371 00:19:11,960 --> 00:19:14,240 Speaker 5: And you can always hear the latest about what's happening 372 00:19:14,240 --> 00:19:16,679 Speaker 5: at the Sam Bankman Freed trial by listening to our 373 00:19:16,680 --> 00:19:19,880 Speaker 5: Bloomberg Lawn podcast. You can find them wherever you get 374 00:19:19,880 --> 00:19:23,120 Speaker 5: your favorite podcasts. Coming up next on the Bloomberg Lawn Show, 375 00:19:23,440 --> 00:19:27,480 Speaker 5: liberal and conservative justices appear to agree on something. I'm 376 00:19:27,600 --> 00:19:30,320 Speaker 5: June Grosso and you're listening to Bloomberg The fate of 377 00:19:30,359 --> 00:19:33,879 Speaker 5: the Consumer Financial Protection Bureau was at stake in a 378 00:19:33,920 --> 00:19:37,200 Speaker 5: case this week asking the Supreme Court to declare its 379 00:19:37,240 --> 00:19:42,600 Speaker 5: funding system unconstitutional. But Justice Is across the ideological spectrum 380 00:19:42,920 --> 00:19:46,480 Speaker 5: seem to be struggling with the argument challenging the agency. 381 00:19:46,880 --> 00:19:50,120 Speaker 5: I don't understand we can't just suddenly decide that things 382 00:19:50,160 --> 00:19:53,560 Speaker 5: are troubling without some kind of legal reference point. 383 00:19:54,320 --> 00:19:57,800 Speaker 9: Sorry, I'm trying to understand your argument that I'm a 384 00:19:57,920 --> 00:20:01,800 Speaker 9: total loss. The perpetual I'm having trouble with. 385 00:20:02,160 --> 00:20:05,600 Speaker 6: Is it like an intelligible principle of money spent? 386 00:20:06,119 --> 00:20:08,239 Speaker 5: I mean, I think we're all struggling to figure out, then, 387 00:20:08,280 --> 00:20:12,480 Speaker 5: what's the standard that you would use. Unlike most federal agencies, 388 00:20:12,800 --> 00:20:18,400 Speaker 5: the CFPB doesn't rely on the annual budget process in Congress. Instead, 389 00:20:18,440 --> 00:20:22,159 Speaker 5: it's funded directly by the Federal Reserve. But Solicitor General 390 00:20:22,240 --> 00:20:27,639 Speaker 5: Elizabeth Prelager told the justices that the CFPB was indistinguishable 391 00:20:27,680 --> 00:20:31,160 Speaker 5: from many other federal agencies, including ones that date back 392 00:20:31,200 --> 00:20:34,840 Speaker 5: to the country's founding, and both liberal and conservative justices 393 00:20:34,960 --> 00:20:37,720 Speaker 5: seem to agree with that. Here are Justice Is Elena 394 00:20:37,800 --> 00:20:41,680 Speaker 5: Kagan and Clarence Thomas, questioning the attorney representing the trade 395 00:20:41,720 --> 00:20:44,119 Speaker 5: associations challenging the agency. 396 00:20:44,600 --> 00:20:50,800 Speaker 9: Annual line item appropriations were some appropriations, but massively not 397 00:20:50,960 --> 00:20:54,240 Speaker 9: all appropriations, and so you're just flying in the face 398 00:20:54,760 --> 00:20:57,160 Speaker 9: of two hundred and fifty years of history. 399 00:20:57,640 --> 00:21:00,600 Speaker 8: I get your point that this is different neat that 400 00:21:00,640 --> 00:21:04,879 Speaker 8: it's odd that they've never gone this far, but that's 401 00:21:04,920 --> 00:21:08,720 Speaker 8: not having gone as far as not a constitutional problem. 402 00:21:08,800 --> 00:21:11,240 Speaker 5: Joining me is Harold Krant, a professor at the Chicago 403 00:21:11,320 --> 00:21:14,359 Speaker 5: Kent College of Law, tell us about the question in 404 00:21:14,400 --> 00:21:18,440 Speaker 5: the case. It's based on the appropriation's clause of the Constitution. 405 00:21:19,080 --> 00:21:22,800 Speaker 2: The appropation clause in the Constitution is situated in Article one. 406 00:21:22,960 --> 00:21:26,440 Speaker 2: It's one of Congress's great powers to counteract any kind 407 00:21:26,560 --> 00:21:30,640 Speaker 2: of presidential overreach because the Central Brands can't do anything 408 00:21:30,920 --> 00:21:34,840 Speaker 2: unless Congress gives it the money to perform certain functions. 409 00:21:34,880 --> 00:21:37,440 Speaker 2: And the clause itself says that no money shall be 410 00:21:37,520 --> 00:21:41,040 Speaker 2: drawn from the Treasury but in consequence of appropriations by law. 411 00:21:41,240 --> 00:21:43,800 Speaker 2: And the question that was raised in the case is 412 00:21:44,400 --> 00:21:48,960 Speaker 2: does appropriations by law imply every year appropriations does it 413 00:21:49,160 --> 00:21:52,720 Speaker 2: imply a strict amount of money? Because in this case, 414 00:21:52,960 --> 00:21:57,480 Speaker 2: under the twenty ten law that created the agency, Congress 415 00:21:57,520 --> 00:22:00,640 Speaker 2: gave it an open ended funding mechanism, which is actually 416 00:22:00,680 --> 00:22:04,840 Speaker 2: be drawn from another agency, the FED, And the amount 417 00:22:04,880 --> 00:22:08,000 Speaker 2: of money that the CFPB could use the maxim was 418 00:22:08,000 --> 00:22:12,439 Speaker 2: twelve percent of the Fed's budget. So the argument was 419 00:22:12,480 --> 00:22:16,440 Speaker 2: this is somewhat of an unusual appropriations decision. The fact 420 00:22:16,480 --> 00:22:20,520 Speaker 2: that Congress decided what the funding mechanism means is that enough, 421 00:22:20,640 --> 00:22:23,280 Speaker 2: And that's what the debate really was about. And both 422 00:22:23,320 --> 00:22:25,800 Speaker 2: sides had a hard time finding some kind of line 423 00:22:25,800 --> 00:22:31,000 Speaker 2: to draw to distinguish permissible congressional appropriations from impremiscible ones. 424 00:22:31,600 --> 00:22:36,520 Speaker 5: Justices on both sides seemed to be generally confused by 425 00:22:36,600 --> 00:22:40,800 Speaker 5: the arguments by former US Listenor General nol Francisco on 426 00:22:40,840 --> 00:22:44,280 Speaker 5: behalf of the trade associations, and understandably. 427 00:22:43,720 --> 00:22:47,760 Speaker 2: Because they were searching for some kind of intelligible principle 428 00:22:47,880 --> 00:22:51,080 Speaker 2: that they could use in order to side with those 429 00:22:51,160 --> 00:22:54,680 Speaker 2: attacking the CFPP, and there was no intelligible principle. I mean, 430 00:22:54,920 --> 00:22:58,120 Speaker 2: the former Social General reached out for some factors that 431 00:22:58,200 --> 00:23:00,520 Speaker 2: there's no real cap of how much money that can 432 00:23:00,560 --> 00:23:02,960 Speaker 2: be spent. I mean, that's not exactly true, but I 433 00:23:03,000 --> 00:23:05,959 Speaker 2: understand what he was saying. There's also no time duration 434 00:23:06,160 --> 00:23:09,880 Speaker 2: meaning that Congress doesn't act the agency bcs this money 435 00:23:10,000 --> 00:23:12,520 Speaker 2: year after year. And finally, it's true that this case 436 00:23:12,560 --> 00:23:16,520 Speaker 2: is different because another agency distributes the money as opposed 437 00:23:16,560 --> 00:23:20,760 Speaker 2: to Congress directly. But this form of sister General couldn't 438 00:23:20,800 --> 00:23:23,040 Speaker 2: say which one of these factors was the most important. 439 00:23:23,160 --> 00:23:26,920 Speaker 2: He basically said, well, this is sweet, generous. All three 440 00:23:26,960 --> 00:23:29,040 Speaker 2: of these things are going on in this case. He 441 00:23:29,160 --> 00:23:32,879 Speaker 2: also added the subsidiary point that there's no sort of 442 00:23:33,000 --> 00:23:36,760 Speaker 2: market check on what the CFPB does. They can just 443 00:23:36,840 --> 00:23:39,560 Speaker 2: keep getting more and more money and nobody will be 444 00:23:39,720 --> 00:23:42,960 Speaker 2: upset by it because it's hidden through the FED. And 445 00:23:43,400 --> 00:23:45,199 Speaker 2: Justice is said, well, where's the line? How do we 446 00:23:45,200 --> 00:23:47,480 Speaker 2: apply this in the future. Give us some kind of 447 00:23:47,560 --> 00:23:51,239 Speaker 2: understanding about which is the most important point, because if 448 00:23:51,280 --> 00:23:54,320 Speaker 2: we take once strictly, the entire country will fall apart. 449 00:23:54,480 --> 00:23:58,000 Speaker 2: Because Congress has been giving this kind of appropriation to 450 00:23:58,040 --> 00:24:00,159 Speaker 2: one form or another. One of these factors is and 451 00:24:00,200 --> 00:24:04,560 Speaker 2: present in countless appropriations throughout history. 452 00:24:05,040 --> 00:24:08,960 Speaker 5: Also at stake is really every regulation and enforcement action 453 00:24:09,119 --> 00:24:13,919 Speaker 5: the CFPB has taken since its beginning, and organizations representing 454 00:24:13,960 --> 00:24:17,680 Speaker 5: the mortgage industry, housing industry, and realtors warn the Court 455 00:24:17,720 --> 00:24:22,639 Speaker 5: of the potentially catastrophic consequences of a broad decision, saying 456 00:24:22,640 --> 00:24:25,000 Speaker 5: that it could set off a wave of challenges and 457 00:24:25,040 --> 00:24:28,480 Speaker 5: the housing market could descend into chaos, to the detriment 458 00:24:28,560 --> 00:24:30,480 Speaker 5: of all mortgage borrowers. 459 00:24:30,840 --> 00:24:33,920 Speaker 2: The actual challenge was to a payday loan, and if 460 00:24:33,920 --> 00:24:38,280 Speaker 2: the court focused only on knocking down the payday loan rule, 461 00:24:38,560 --> 00:24:41,600 Speaker 2: then the markets would not be rattled. But the concern 462 00:24:41,720 --> 00:24:44,280 Speaker 2: is realist. What's the remedy's going to be. It's hard 463 00:24:44,320 --> 00:24:47,960 Speaker 2: to conceive of what the court could do if it 464 00:24:48,000 --> 00:24:51,480 Speaker 2: found this appropriation's defect. Would it make up an appropriation 465 00:24:51,560 --> 00:24:55,280 Speaker 2: from Congress? Would it say the entire statues unconstitutional and 466 00:24:55,320 --> 00:24:57,320 Speaker 2: send it back to Congress to decide what to do. 467 00:24:57,520 --> 00:24:59,320 Speaker 2: And if they did that, what's going to govern the 468 00:24:59,320 --> 00:25:02,159 Speaker 2: mortgage industry and their interim? And that was the concern. 469 00:25:02,400 --> 00:25:02,560 Speaker 5: Now. 470 00:25:02,560 --> 00:25:06,119 Speaker 2: The good news is that no justice during the Soster 471 00:25:06,160 --> 00:25:09,719 Speaker 2: General's argument, asked her what she thought about the appropriate remedy. 472 00:25:09,920 --> 00:25:12,680 Speaker 2: That might be another signal that the Court is not 473 00:25:12,720 --> 00:25:16,720 Speaker 2: going to hold this unconstitutional. There was some discussion later 474 00:25:16,960 --> 00:25:20,560 Speaker 2: with the challengers about what remedy they seek, but it's 475 00:25:20,680 --> 00:25:23,879 Speaker 2: very difficult to craft a remedy without roiling both the 476 00:25:23,920 --> 00:25:27,160 Speaker 2: mortgage and the credit markets, not to mention jeopardizing lump 477 00:25:27,200 --> 00:25:30,159 Speaker 2: sum appropriations to other industries and so forth. 478 00:25:30,440 --> 00:25:34,000 Speaker 5: The decision that Biden administration was appealing from here came 479 00:25:34,040 --> 00:25:37,959 Speaker 5: out of the ultra conservative Fifth Circuit, from a panel 480 00:25:38,000 --> 00:25:41,400 Speaker 5: of Trump appointees, And this was a novel argument. Wasn't 481 00:25:41,400 --> 00:25:43,880 Speaker 5: it to base this on the appropriations clause? 482 00:25:45,040 --> 00:25:48,919 Speaker 2: I sense that the Court may be moderating slightly, and 483 00:25:49,119 --> 00:25:51,960 Speaker 2: that it understands that because of the signals that is 484 00:25:51,960 --> 00:25:54,760 Speaker 2: given in past cases, there are lower court judges who 485 00:25:54,760 --> 00:25:57,879 Speaker 2: are becoming more and more adventurous as the ones in 486 00:25:57,880 --> 00:26:02,119 Speaker 2: the Fifth Circuit, and be a residual feeling not in 487 00:26:02,160 --> 00:26:04,760 Speaker 2: all the justices, but in some that that just goes 488 00:26:04,920 --> 00:26:07,359 Speaker 2: too far, that you have to have some kind of 489 00:26:07,520 --> 00:26:11,119 Speaker 2: principled decision backed by history, which in other context is 490 00:26:11,200 --> 00:26:14,160 Speaker 2: very important to the court, and this simply doesn't exist 491 00:26:14,240 --> 00:26:17,320 Speaker 2: in this case. So it seems relatively clear, though not 492 00:26:17,400 --> 00:26:20,280 Speaker 2: for sure, of course, that the Court will rebuff the 493 00:26:20,280 --> 00:26:23,240 Speaker 2: Fifth Circuit, saying that it went just too far, because 494 00:26:23,400 --> 00:26:26,920 Speaker 2: it'd be incredibly difficult to craft an opinion that wouldn't 495 00:26:26,960 --> 00:26:30,440 Speaker 2: jeopardize countless other agencies. I mean, just give a couple 496 00:26:30,440 --> 00:26:34,479 Speaker 2: of examples. The Post Office gets to enlarge its budget 497 00:26:34,480 --> 00:26:37,080 Speaker 2: depending upon what it brings in with postal fees, as 498 00:26:37,119 --> 00:26:40,840 Speaker 2: does any federal agency that relies upon permit systems. And 499 00:26:41,119 --> 00:26:44,639 Speaker 2: you know, the Custom's Office was structured that way as well. 500 00:26:44,800 --> 00:26:48,480 Speaker 2: And the Congress has made sort of perpetual delegations to 501 00:26:48,680 --> 00:26:51,679 Speaker 2: fill Social Security checks every year, and it doesn't have 502 00:26:51,760 --> 00:26:53,880 Speaker 2: to re up those every year. So each of these 503 00:26:53,920 --> 00:26:59,200 Speaker 2: factors that the challengers raised exist in many fundamental statutes. 504 00:26:59,240 --> 00:27:01,919 Speaker 2: So it's very difficult, and the Court is aware that 505 00:27:01,960 --> 00:27:05,080 Speaker 2: if they try to draw aline it may jeopardize very 506 00:27:05,119 --> 00:27:07,200 Speaker 2: basics of executive branch government. 507 00:27:07,800 --> 00:27:10,639 Speaker 5: This is one of several cases coming before the Court 508 00:27:10,720 --> 00:27:17,080 Speaker 5: this term that challenge agency authority attack on the administrative state. 509 00:27:17,600 --> 00:27:22,160 Speaker 5: Do these CFPB arguments indicate that the conservative justices might 510 00:27:22,240 --> 00:27:25,919 Speaker 5: not go as far as conservatives who are against big 511 00:27:25,960 --> 00:27:28,840 Speaker 5: government might want, or is it just based on the 512 00:27:28,880 --> 00:27:29,800 Speaker 5: facts of this case. 513 00:27:30,119 --> 00:27:32,880 Speaker 2: Well, the Court ushered in all of these cases by 514 00:27:32,920 --> 00:27:36,119 Speaker 2: signaling that it was re examining the very sort of 515 00:27:36,160 --> 00:27:39,000 Speaker 2: accepted basis of the administrative state that's existed in some 516 00:27:39,040 --> 00:27:41,080 Speaker 2: ways for seventy five years, in some ways since our 517 00:27:41,160 --> 00:27:44,720 Speaker 2: nation's history. So the Court has invited these kinds of challenges, 518 00:27:45,040 --> 00:27:47,679 Speaker 2: and I think now that so many challenges are taking place, 519 00:27:47,720 --> 00:27:50,080 Speaker 2: and course like the Fifth Circuit are chopping at the 520 00:27:50,119 --> 00:27:53,360 Speaker 2: bit to pare down the authority of executive branch officials, 521 00:27:53,440 --> 00:27:55,000 Speaker 2: the Court is going to have to make a tough 522 00:27:55,040 --> 00:27:57,399 Speaker 2: call about where to draw the line. Even though this 523 00:27:57,520 --> 00:28:01,359 Speaker 2: case would have had tremendous significance and still could if 524 00:28:01,480 --> 00:28:04,760 Speaker 2: the agency loses. There's another case that's penning and hasn't 525 00:28:04,760 --> 00:28:08,040 Speaker 2: been set for argument yet, the Jocracy case, which itself 526 00:28:08,080 --> 00:28:12,320 Speaker 2: has incredible seeds of doing great mischief to the administrative 527 00:28:12,359 --> 00:28:16,359 Speaker 2: state because they're there both raised and non delegation argument, 528 00:28:16,560 --> 00:28:20,200 Speaker 2: which would limit the authority of agencies to interpret broad 529 00:28:20,560 --> 00:28:23,920 Speaker 2: congressional statutes in ways that they have to every day. 530 00:28:24,080 --> 00:28:26,679 Speaker 2: But the other argument given is that agencies can no 531 00:28:26,720 --> 00:28:31,360 Speaker 2: longer go before Agencies tribunal to bring most enforcement actions, 532 00:28:31,440 --> 00:28:34,800 Speaker 2: but rather have to proceed in court with a jury trial, 533 00:28:35,200 --> 00:28:38,080 Speaker 2: which would take an immense amount of time and money 534 00:28:38,360 --> 00:28:42,560 Speaker 2: and lose the ability of an expert tribunal to understand 535 00:28:42,680 --> 00:28:45,760 Speaker 2: the facts of the case. So if those arguments are 536 00:28:45,880 --> 00:28:48,560 Speaker 2: held by the court in that Fifth Circuit challenge, that 537 00:28:48,640 --> 00:28:51,800 Speaker 2: would be again a huge tectonic shift of the loss 538 00:28:52,040 --> 00:28:54,240 Speaker 2: of agency, flexibility and power. 539 00:28:54,560 --> 00:28:57,720 Speaker 5: Well, the CFPB survived the last time it came before 540 00:28:57,760 --> 00:29:00,640 Speaker 5: the Court, and it appears it's going to serve again. 541 00:29:01,040 --> 00:29:04,080 Speaker 5: Thanks so much, Hal. That's Professor Harold Krent of the 542 00:29:04,160 --> 00:29:06,800 Speaker 5: Chicago Kent College of Law. Coming up next on the 543 00:29:06,840 --> 00:29:09,600 Speaker 5: Bloomberg Lawn Show. We're going to take a closer look 544 00:29:09,600 --> 00:29:12,240 Speaker 5: at the Fifth Circuit and the pile of cases it 545 00:29:12,280 --> 00:29:15,880 Speaker 5: has before the Supreme Court. This term. I'm June Grosso 546 00:29:16,000 --> 00:29:19,360 Speaker 5: and you're listening to Bloomberg. An outside share of the 547 00:29:19,400 --> 00:29:22,640 Speaker 5: Supreme Court's biggest case is this term will come from 548 00:29:22,640 --> 00:29:26,840 Speaker 5: the ultra conservative Fifth Circuit Court of Appeals, who's far 549 00:29:26,920 --> 00:29:31,520 Speaker 5: reaching rulings on federal regulatory power, guns, and social media 550 00:29:31,920 --> 00:29:35,760 Speaker 5: are proving impossible for the Supreme Court to ignore. Here's 551 00:29:35,840 --> 00:29:39,720 Speaker 5: former US Solicitor General Gregory Gar's take on the Fifth Circuit. 552 00:29:40,080 --> 00:29:41,960 Speaker 3: Some people have said it's sort of the Supreme Court 553 00:29:42,080 --> 00:29:44,400 Speaker 3: versus the Fifth Circuit. It's interesting. I mean, the Fifth 554 00:29:44,400 --> 00:29:48,400 Speaker 3: Circuit is now the most conservative circuit among the many. 555 00:29:49,000 --> 00:29:51,600 Speaker 3: And you know the kind of question that all these 556 00:29:51,640 --> 00:29:54,400 Speaker 3: cases present is whether the Fifth Circuit has got out 557 00:29:54,800 --> 00:29:58,040 Speaker 3: ahead of even the US Supreme Court today in terms 558 00:29:58,120 --> 00:30:01,280 Speaker 3: of how conservative it is, whether or not the US 559 00:30:01,320 --> 00:30:04,080 Speaker 3: Supreme Court feels as though it has to rein it 560 00:30:04,120 --> 00:30:06,160 Speaker 3: in a little bit, joining me. 561 00:30:06,080 --> 00:30:09,560 Speaker 5: Is Bloomberg, New Supreme Court reporter Greg Store. Greg just 562 00:30:09,600 --> 00:30:11,840 Speaker 5: how conservative is the Fifth Circuit. 563 00:30:12,360 --> 00:30:16,320 Speaker 2: It's unquestionably the most conservative federal appeals court in the country. 564 00:30:16,680 --> 00:30:19,520 Speaker 2: Twelve of its full time judges are Republican appointees and 565 00:30:19,560 --> 00:30:22,800 Speaker 2: only four are Democratic appointees. And six of those Republican 566 00:30:22,840 --> 00:30:25,840 Speaker 2: appointees are appointees of Donald Trump. And you know, they 567 00:30:25,840 --> 00:30:28,120 Speaker 2: include some justices who are really trying to make a 568 00:30:28,160 --> 00:30:31,239 Speaker 2: name for themselves with some really far reaching rulings. And 569 00:30:31,280 --> 00:30:34,320 Speaker 2: so it's kind of consistently the place where conservatives go 570 00:30:34,360 --> 00:30:36,040 Speaker 2: when they are looking to push the law in a 571 00:30:36,080 --> 00:30:36,720 Speaker 2: certain direction. 572 00:30:37,240 --> 00:30:39,840 Speaker 5: Tell us about the Trump appointees on the Fifth Circuit, 573 00:30:39,920 --> 00:30:44,040 Speaker 5: because what seems unusual about them is they're not only conservative, 574 00:30:44,120 --> 00:30:48,360 Speaker 5: but several of them made statements before they became judges 575 00:30:48,920 --> 00:30:54,040 Speaker 5: that staked out very conservative positions on issues like abortion 576 00:30:54,320 --> 00:30:55,560 Speaker 5: and gay marriage. 577 00:30:55,960 --> 00:30:58,760 Speaker 2: Yeah. So there's also one who, while on the bench 578 00:30:58,920 --> 00:31:02,200 Speaker 2: has made some really remarkable statements. That's James Hose. He's 579 00:31:02,240 --> 00:31:05,520 Speaker 2: described abortion while on the bench as a moral tragedy 580 00:31:05,760 --> 00:31:08,440 Speaker 2: and written that if there's too much money in politics, 581 00:31:08,440 --> 00:31:10,920 Speaker 2: because there's too much government. And then there's some other 582 00:31:11,000 --> 00:31:13,520 Speaker 2: judges that really drew a lot of controversy when they 583 00:31:13,520 --> 00:31:16,719 Speaker 2: were nominated. A guy like Corey Wilson, who had written 584 00:31:16,720 --> 00:31:19,680 Speaker 2: that gay marriage is a pander to liberal interest groups. 585 00:31:19,920 --> 00:31:23,160 Speaker 2: Another judge Stuart Kyle Duncan, who has written a lot 586 00:31:23,200 --> 00:31:27,240 Speaker 2: of things in opposition to LGBTQ rights, and he was 587 00:31:27,280 --> 00:31:30,320 Speaker 2: a judge where protesters shut him down, wouldn't let him 588 00:31:30,320 --> 00:31:32,680 Speaker 2: speaks at Stanford Law School. So he's very much a 589 00:31:32,760 --> 00:31:33,320 Speaker 2: lightning rod. 590 00:31:33,680 --> 00:31:37,440 Speaker 5: The Fifth Circuit hasn't been bearing that well at the 591 00:31:37,480 --> 00:31:40,360 Speaker 5: Supreme Court. To me, it's taken the position the Ninth 592 00:31:40,360 --> 00:31:42,440 Speaker 5: Circuit used to take, where it was the most reversed 593 00:31:42,480 --> 00:31:45,400 Speaker 5: circuit for so many years. So tell us how it's 594 00:31:45,480 --> 00:31:47,200 Speaker 5: done in the past year. 595 00:31:47,680 --> 00:31:50,400 Speaker 2: Not very well. So in the last Supreme Court term, 596 00:31:50,720 --> 00:31:53,560 Speaker 2: in seven of nine cases the Court decided if at 597 00:31:53,680 --> 00:31:57,520 Speaker 2: least partially or largely reversed the Fifth Circuit. And the 598 00:31:57,520 --> 00:31:59,640 Speaker 2: way it's different, just to go back to the Ninth Circuit. 599 00:31:59,680 --> 00:32:02,120 Speaker 2: The way different is the Ninth Circuit. I had a 600 00:32:02,120 --> 00:32:04,560 Speaker 2: well deserved reputation back in the day as being very, 601 00:32:04,600 --> 00:32:07,160 Speaker 2: very liberal, and the Supreme Court, even when it wasn't 602 00:32:07,160 --> 00:32:10,520 Speaker 2: as conservative as this court is, would say, no, we're 603 00:32:10,520 --> 00:32:13,360 Speaker 2: not going to let you do that. Ninth Circuit here, 604 00:32:13,440 --> 00:32:15,640 Speaker 2: it's a case where the Fifth Circuit is trying to 605 00:32:15,680 --> 00:32:18,480 Speaker 2: sort of push the envelope even beyond where the conservative 606 00:32:18,520 --> 00:32:20,000 Speaker 2: Supreme Court has gone do. 607 00:32:20,080 --> 00:32:22,680 Speaker 5: Some of their decisions seem like decisions that the Supreme 608 00:32:22,720 --> 00:32:24,160 Speaker 5: Court almost has to take. 609 00:32:24,360 --> 00:32:26,640 Speaker 2: Yeah, So a number of the cases that Supreme Court 610 00:32:26,680 --> 00:32:30,600 Speaker 2: has this term are cases where the Biden administration is appealing, 611 00:32:30,680 --> 00:32:33,760 Speaker 2: and there are cases where the Fifth Circuit struck down 612 00:32:33,880 --> 00:32:38,280 Speaker 2: something that either an administrative agency or Congress did. So 613 00:32:38,480 --> 00:32:41,400 Speaker 2: one example, there's a law that says the people subject 614 00:32:41,440 --> 00:32:44,560 Speaker 2: to a domestic violence restraining order can have gun rights 615 00:32:44,640 --> 00:32:48,920 Speaker 2: taken away. The Fifth Circuit said, Nope, that law is unconstitutional. 616 00:32:49,040 --> 00:32:51,600 Speaker 2: The Biden administration came up to the Supreme Court, and really, 617 00:32:51,600 --> 00:32:54,320 Speaker 2: in that sort of situation, the Court almost has to 618 00:32:54,360 --> 00:32:55,040 Speaker 2: take the case. 619 00:32:55,280 --> 00:32:57,479 Speaker 5: We'll have to keep a scorecard for the Fifth Circuit 620 00:32:57,520 --> 00:33:01,040 Speaker 5: this term. Thanks so much, Greg. That's Bloomberg's Supreme Court reporter, 621 00:33:01,120 --> 00:33:03,520 Speaker 5: Greg Store And that's it for this edition of The 622 00:33:03,520 --> 00:33:06,480 Speaker 5: Bloomberg Law Show. Remember you can always get the latest 623 00:33:06,520 --> 00:33:09,640 Speaker 5: legal news on our Bloomberg Law podcasts. You can find 624 00:33:09,680 --> 00:33:14,240 Speaker 5: them on Apple Podcasts, Spotify, and at www dot Bloomberg 625 00:33:14,320 --> 00:33:18,120 Speaker 5: dot com slash podcast Slash Law, And remember to tune 626 00:33:18,120 --> 00:33:21,360 Speaker 5: into The Bloomberg Law Show every weeknight at ten pm 627 00:33:21,400 --> 00:33:24,960 Speaker 5: Wall Street Time. I'm June Grosso and you're listening to 628 00:33:25,000 --> 00:33:25,560 Speaker 5: Bloomberg