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

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Speaker 2: Welcome to the Bloomberg Law Show. I'm June Grosso. Donald

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Speaker 2: Trump wants a mistrial in his civil fraud case. The

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Speaker 2: Supreme Court's new ethics code is much ado about nothing.

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Speaker 2: A First Amendment challenge to charges over false election robocalls

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Speaker 2: and crypto investors sue SBF and celebrity promoters.

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Speaker 3: I have a rogue judge who rules that properties are

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Speaker 3: worth a tiny fraction one one hundred, a tiny fraction

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Speaker 3: of what they actually are.

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Speaker 2: It was almost like Donald Trump was forecasting his motion

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Speaker 2: for a mistrial even before his civil fraud trial began

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Speaker 2: last month. He's arguing that the judge has tainted the

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Speaker 2: proceedings with tangible and overwhelming bias. The New York Attorney

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Speaker 2: General took six weeks to present her case that the

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Speaker 2: former president deliberately inflated his net worth to fool banks

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Speaker 2: and insurers into giving him better terms on hundreds of

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Speaker 2: millions of dollars in loans, and as the Trump team

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Speaker 2: kicked off its case on Monday, the first witness, Donald

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Speaker 2: Trump Junior, gave a snapshot of the defense that his

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Speaker 2: father has been harping on basically, no harm, no foul.

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Speaker 1: You guysn't got to think about the precedent that this

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Speaker 1: case sets if an attorney general ken years later after

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Speaker 1: all parties of transactions are paid back in full with interest,

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Speaker 1: making hundreds of millions of dollars where they have no

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Speaker 1: complaint where they said they wouldn't have done anything Differently.

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Speaker 2: Joining me is former federal prosecutor Jennifer Rogers and adjunct

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Speaker 2: professor at NYU Law School. So Jennifer tell us about

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Speaker 2: this mistrial motion that everyone knows is going nowhere.

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Speaker 4: Well, it's really the same complaint that they've been making

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Speaker 4: in court about the judge and specifically his law clerk.

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Speaker 4: The defense has been really up in arms about the

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Speaker 4: law clerk and accusing her of making facial expressions she

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Speaker 4: shouldn't make, and passing notes and taking a greater role

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Speaker 4: than they think she should be taking in the trial.

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Speaker 4: And they've been making those objections in court, and that

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Speaker 4: really is the focus of the mistrial motion, that the

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Speaker 4: clerk is taking an outsized role, and the judge himself

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Speaker 4: is also biased against the defendants, and so putting those

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Speaker 4: things together, they allege that a mistrial should be granted,

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Speaker 4: I have to say, it.

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Speaker 2: Does seem like the judge is a little unorthodox with

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Speaker 2: what's happening in the courtroom. But is there anything wrong

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Speaker 2: with having the law clerk pass him notes and asking

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Speaker 2: her questions and things like that.

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Speaker 4: Not the way that you put it, there's certainly nothing

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Speaker 4: wrong with relying on your law clerk to help you

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Speaker 4: try the matter, do research and give you the results,

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Speaker 4: even give her opinion about what's happening. You know, there

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Speaker 4: are no rules around really how you're supposed to use

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Speaker 4: your law clerks in that way. The only issue would

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Speaker 4: be if there were demonstrated bias. I mean, I do

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Speaker 4: think that if they could show an actual bias on

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Speaker 4: the part of the judge or the clerk, and then

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Speaker 4: they would try to show that, you know, the law

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Speaker 4: clerk's bias is infecting the judge, then you know, you

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Speaker 4: could see a court saying, and it's certainly not going

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Speaker 4: to be this court right, because this judge doesn't believe

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Speaker 4: anything wrong is happening, and he's not going to grant

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Speaker 4: this motion. But then of course it goes up on appeal.

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Speaker 4: So you could see in theory and appellate court saying, wow,

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Speaker 4: you know, the law clerk told the judge all these

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Speaker 4: untrue and really prejudical things about one of the parties,

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Speaker 4: and the judge said that he took that into account

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Speaker 4: and that's why he's ruling against them. I mean, that's

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Speaker 4: the sort of hypothetical that you could see an appellate

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Speaker 4: court saying, well, wait a minute, that seems like bias

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Speaker 4: to us, and you know, maybe we'll consider this, But

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Speaker 4: we don't have anything like that here. You know, we

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Speaker 4: have some allegations that aren't even true, you know, the

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Speaker 4: nonsense about the law clerk dating Chuck Schumer, and then

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Speaker 4: there's a couple of like the law clerk had made

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Speaker 4: a donation to a Democrat, and those sorts of things

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Speaker 4: are never going to rise to the level of demonstrating bias.

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Speaker 4: If you give to someone of a political party that's

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Speaker 4: the opposite of the political party of one of the litigants,

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Speaker 4: that's just never going to rise to the level of

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Speaker 4: any sort of demonstrated bias.

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Speaker 2: Let's turn to Trump's defense, and I'm going to sort

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Speaker 2: of go through what I see as the defense. So

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Speaker 2: one is the valuation of properties like the ones listed

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Speaker 2: on Donald Trump's financial statements is not an exact science.

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Speaker 2: It's more like an art than a science. And not

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Speaker 2: only did Trump testify to this, but they've had accounting

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Speaker 2: experts testified. One said the process of determining the estimated

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Speaker 2: value of a property could result in a range of values,

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Speaker 2: no one of which is the right or wrong answer.

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Speaker 2: It's a judgment call.

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Speaker 4: Yeah, I mean, listen, this is the defense that they

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Speaker 4: have to make. The judge has effectively already rejected this

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Speaker 4: by finding that there was fraud here because the judge found,

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Speaker 4: you know, it's not so much that the statement said

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Speaker 4: ten thousand and a more reasonable amount would be five thousand.

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Speaker 4: I mean, the judge found that there were magnitudes of

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Speaker 4: difference between what's an accurate assessment and the assessments that

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Speaker 4: were given by the defendants on the financial statement. So

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Speaker 4: it's not even a close call. So even if you say, listen,

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Speaker 4: we put in proof that it's not an exact science,

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Speaker 4: it's like, okay, fair enough, but is it not an

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Speaker 4: exact science enough to talk about you know, hundreds of percentages,

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Speaker 4: you know, one of the properties that was like twenty

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Speaker 4: three hundred times or something between what the judge found

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Speaker 4: was a reasonable assessment and the assessment on the papers.

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Speaker 4: So at some point you can say all that, but

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Speaker 4: it doesn't really get you as far as you need

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Speaker 4: to go. And the heart of this has already been

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Speaker 4: decided by the judge, So I don't think he's going

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Speaker 4: to be by testimony that says, hey, it's not an

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Speaker 4: exact science, you know, let's treat it more as an

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Speaker 4: art and cut on some slack.

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Speaker 2: For that reason, another defense seems to be, instead of

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Speaker 2: blaming the lawyers, as Trump may do in other cases,

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Speaker 2: blame the accountants. So Eric Trump testified that he relied

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Speaker 2: on the accounting firms to assure the financial statements were accurate.

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Speaker 2: Donald Trump Junior testified he signed off on the statements

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Speaker 2: but left the work to outside accountants. And Trump himself

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Speaker 2: has said, you know, I paid the accounts all this money.

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Speaker 2: Where does that get them?

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Speaker 4: Yeah, I don't think this was going to work either,

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Speaker 4: for largely the same reason. So judge has already considered

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Speaker 4: that as part of his finding that the defendants did

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Speaker 4: commit fraud. Here, I mean that the statements themselves talk

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Speaker 4: about what it was that the accountants were doing and

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Speaker 4: described it as more of a compilation, right, that they're

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Speaker 4: relying on the documents and the actuity of the documents

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Speaker 4: provided by the organization, and they're not attesting to that themselves,

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Speaker 4: the accountants. So I don't think that the just going

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Speaker 4: to buy that particular argument that you know, I'm not responsible.

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Speaker 4: Someone said, it's kind of like I can't be convicted

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Speaker 4: of tax fraud. You have to go after my accountant,

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Speaker 4: even though you know I lied to him about what

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Speaker 4: I was paying in taxes or what this particular property

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Speaker 4: was worth or so on. You can't get away with

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Speaker 4: it by just kind of saying, hey, you know, I

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Speaker 4: have an accountant, so therefore I'm free and clear of

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Speaker 4: all liability.

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Speaker 2: Another thing is Trump testified and Ivanka testified about the

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Speaker 2: relationship with Deutsche Bank, and Trump said that Deutsche Bank

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Speaker 2: was extremely happy and thrilled with him. Does it matter

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Speaker 2: if the person or entity being defrauded doesn't realize it

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Speaker 2: or doesn't care.

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Speaker 4: So this is actually the most interesting to me because

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Speaker 4: in a way, it doesn't right. This suit is not

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Speaker 4: being brought by the bank saying we've been harmed, we

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Speaker 4: want you know, our money back, or whatever, being brought

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Speaker 4: by the Attorney General, who's really standing in the place

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Speaker 4: of New Yorkers and saying New Yorkers, the state, and

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Speaker 4: as a people in the state have an interest in

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Speaker 4: these financial institutions not being duped, right, not being lied

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Speaker 4: to by companies. We don't want companies to behave that way,

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Speaker 4: and if you do, we're going to sue you. So

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Speaker 4: it's not that the banks have to be harmed. But

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Speaker 4: all of that said, it is really interesting, not so

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Speaker 4: much that the banks weren't harmed and he paid back

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Speaker 4: the loans, and that's an excuse that goes absolutely nowhere,

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Speaker 4: because then the comeback was well. But if the banks

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Speaker 4: knew that these loans were as risky as they were

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Speaker 4: because the valuations were so off, perhaps you wouldn't have

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Speaker 4: gotten such a low interest rate, right, We would have

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Speaker 4: taken that risk and charged you more for it, so

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Speaker 4: that we made more money and we lost out on

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Speaker 4: that additional money. What's puzzling to me is that the

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Speaker 4: Attorney General really didn't get any witness to say that

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Speaker 4: they had relied on them, and that they would have,

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Speaker 4: for example, charged a higher interest rate if they knew

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Speaker 4: the worth of the properties were being exaggerated. And I

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Speaker 4: can only think that they didn't ask those direct questions

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Speaker 4: and get that evidence because they wouldn't have, right, the

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Speaker 4: witnesses weren't going to say that. So that is kind

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Speaker 4: of interesting because I do think it goes to the

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Speaker 4: amount ultimately that the judge will find should be paid. Right,

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Speaker 4: the fine, the disgorgement amount. Really it is impacted by

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Speaker 4: how much the banks would have made compared to what

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Speaker 4: they did make. And if they're saying we don't care,

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Speaker 4: we really didn't set the interest rate with the values

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Speaker 4: of the property in mind, the accurate values of the property,

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Speaker 4: then I think that probably does impact the damages amount here.

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Speaker 4: So I do think that's an interesting argument that has

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Speaker 4: some legs here because of the way the trial played out,

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Speaker 4: and because of the fact that they didn't get this

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Speaker 4: testimony that I frankly expected they would get that, someone

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Speaker 4: would say, sure, it matters to me because I've got

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Speaker 4: to set an interest amount and it's going to be

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Speaker 4: impacted by the value of the assets that's behind it.

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Speaker 2: And why do you think the defense team keeps bringing

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Speaker 2: up the disclaimer on the financial statements, saying it absolves

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Speaker 2: him from any LA even though the judge has rejected

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Speaker 2: that argument several times.

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Speaker 4: Large part, they're kind of laying their appeal record right.

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Speaker 4: They have to make these arguments and they want them

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Speaker 4: to be fleshed out with their witnesses and so on

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Speaker 4: so that the appellate Court can consider them. Listen, they're

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Speaker 4: taking their shot.

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Speaker 2: Trump did have a win in the case. On Thursday,

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Speaker 2: a New York Cappella judge temporarily lifted judging Goren's gag

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Speaker 2: order that had barred Trump from commenting about court personnel.

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Speaker 2: Thanks so much, Jennifer. That's former federal prosecutor Jennifer Rogers

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Speaker 2: coming up the Supreme Court's new Ethics Code. I'm June

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Speaker 2: Grasso and you're listening to Bloomberg. You have to take

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Speaker 2: me to shaulf according to the Code of the Order

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Speaker 2: of the person.

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Speaker 1: Your return to show was not part of our negotiations

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Speaker 1: nor our agreement, so I must do nothing. And secondly,

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Speaker 1: you must be a pirate for the Pirate's Code. You

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Speaker 1: reply and you're not. And thirdly, the code is more

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Speaker 1: what you're called guideline it stelectual rules. Welcome aboard the

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Speaker 1: Black Code.

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Speaker 2: The Supreme Court's new Ethics Code aims a lot like

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Speaker 2: the Pirate's Code, more like guidelines than actual rules for

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Speaker 2: the first time the Justices have adopted a code of conduct,

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Speaker 2: responding to pressure from a stream of ethics controversies. But

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Speaker 2: the code won't necessarily mean any changes in the way

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Speaker 2: the nine justices conduct themselves. In fact, the Justices basically

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Speaker 2: admit that in the introduction, saying, for the most part,

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Speaker 2: these rules and principles are not new. Joining me, is

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Speaker 2: constitutional law expert David Souper, a professor at Georgetown Law,

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Speaker 2: is anything different for the justices because they've adopted this code.

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Speaker 5: This is an astute pr move, That's all it is.

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Speaker 5: They've done a number of disclosures of extremely questionable activities

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Speaker 5: by several justices, most prominently Justices Thomas and Alito, receiving

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Speaker 5: valuable trips other financial favors from rich, ideologically committed donors,

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Speaker 5: many of whom have business in front of the Court.

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Speaker 5: So the Court, i think, felt that it needed to

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Speaker 5: do something. There were justices calling for an ethics code,

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Speaker 5: and my assumption is that the compromise they reached between

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Speaker 5: no ethics code and an ethics code was something that

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Speaker 5: is in name in ethics code, but that has few

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Speaker 5: with any of the functions of an ethics code.

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Speaker 2: In the statement of the court that precedes the code.

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Speaker 2: There's a little bit of griping about this misunderstanding that

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Speaker 2: justices regard themselves as unrestricted by any ethics rules. Go figure,

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Speaker 2: and it says the Court has long had the equivalent

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Speaker 2: of common law ethics rules. Does that statement mean that

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Speaker 2: these are the same rules that Justice Clarence Thomas, for example,

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Speaker 2: followed in accepting all those luxury trips the underwriting of

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Speaker 2: the rv et cetera.

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Speaker 5: The fact that he did that and that there has

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Speaker 5: been no action about that on the Court suggest that

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Speaker 5: this so called common law ethics rules are largely useless.

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Speaker 5: If any judge on a lower court had done this,

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Speaker 5: they would be facing serious problems.

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Speaker 2: Unlike the rules for a lower court judges. There's no

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Speaker 2: enforcement mechanism at all in this code.

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Speaker 5: That's correct. The failure of this code is twofold. One,

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Speaker 5: its content is extraordinarily weak, and second, there is no

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Speaker 5: procedure for enforcing it. It is certainly true that the

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Speaker 5: Supreme Court is not and should not be subject to

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Speaker 5: the executive branch or the legislative branch, but it could

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Speaker 5: set up its own enforcement mechanism. It could, for example,

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Speaker 5: as a process for people to file complaints, have an

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Speaker 5: office that investigates those complaints and makes recommendations to the court,

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Speaker 5: and a procedure for the Court itself to act on

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Speaker 5: these matters. It could also have a procedure where a

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Speaker 5: justice's behavior is particularly problematic of referring that information to Congress,

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Speaker 5: which does have the power to begin impeachment proceedings.

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Speaker 2: Of course, Congress hasn't impeached a justice since the early

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Speaker 2: eighteen hundreds. But moving on, there have been a lot

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Speaker 2: of complaints about the justices not recusing themselves in cases

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Speaker 2: where it seems like they should. So when it comes

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Speaker 2: to recusals, the justices include a line that's not in

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Speaker 2: the Code of Conduct for United States judges. It says,

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Speaker 2: quote the rule of necessity may override the rule of disqualification.

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Speaker 2: Tell us what they mean by that.

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Speaker 5: What they are basically saying is that even if they

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Speaker 5: have a conflict of interest or some other compelling reason

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Speaker 5: why they shouldn't sit on a case, that the desirability

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Speaker 5: of having nine justices sit on a case may justify

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Speaker 5: disregarding that conflict of interest. Nationale is that while we

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Speaker 5: have many lower courts and many lower court judges, and

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Speaker 5: most lower courts don't sit as a complete body. Ever,

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Speaker 5: the Supreme Court is unique, and if you have a

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Speaker 5: decision rendered by less than all of the justices, it

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Speaker 5: may not get five votes for any result, and that

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Speaker 5: leaves the state of the law uncertain. That's a problem

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Speaker 5: the Supreme Court has dealt with many times over the

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Speaker 5: years when justices have properly refused themselves for any number

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Speaker 5: of reasons, and occasionally it does create pickups in the

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Speaker 5: law or uncertainties. But the same thing can happen when

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Speaker 5: all nine justices sit and they can't agree on any

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Speaker 5: one resolution to a case. So this is not a

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Speaker 5: huge problem, but it does signal a lack of seriousness

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Speaker 5: of bet ethic.

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Speaker 2: Better to have a hiccup in a case than to

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Speaker 2: have a justice sitting who should be recused. Also, while

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Speaker 2: lower court judges are told they quote shall disqualify when

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Speaker 2: their impartiality might be questioned, the justice has changed the

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Speaker 2: word shall to should disqualify. So are their rules for

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Speaker 2: accusal less stringent than the rules that they set out

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Speaker 2: for lower court judges.

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Speaker 5: Yes, they are. Indeed, the word shall does not appear

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Speaker 5: anywhere in their code. It appears several places in the

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Speaker 5: code for lower court judges, but nowhere in this new

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Speaker 5: code for the Supreme Court. So they've chosen not to

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Speaker 5: live by the standards they impose on lower court judges.

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Speaker 5: The standards they impose on lower court judges are appropriate.

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Speaker 5: I wouldn't want to see them loosened, but it's telling

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Speaker 5: that they're unwilling to live by the same standards themselves.

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Speaker 2: Let's take the major tax code case that's coming up,

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Speaker 2: where Justice Alito was interviewed a friendly interview for the

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Speaker 2: Wall Street Journal by one of the lawyers. Under this code,

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Speaker 2: should Justice Alito recuse himself from that case?

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Speaker 5: The code is rather vague. I think as a matter

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Speaker 5: of common sense, Justice Leto absolutely should. He was under

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Speaker 5: public criticism and this attorney gave him help in defending

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Speaker 5: himself against that public criticism, which is a very valuable thing.

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Speaker 5: If I was being criticized the way Justice Ledo did,

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Speaker 5: I would prefer that friendly interview to one hundred thousand dollars.

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Speaker 5: So it is giving a justice something of great value.

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Speaker 5: As a case that's involving you is going in front

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Speaker 5: of the court, it seems obvious he should refuse himself.

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Speaker 5: But the code is so vague that it certainly does

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Speaker 5: not compel him to do so and provides no means

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Speaker 5: for the public to complain if he doesn't do so.

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Speaker 2: Would this code have prevented the Conservative justices from attending

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Speaker 2: the Federalist Society gala last week that was headlined by

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Speaker 2: Justice Amy Cony Barrett.

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Speaker 5: No, it doesn't prevent much of anything, and it certainly

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Speaker 5: wouldn't prevent that, like that is raising money for an

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Speaker 5: organization that is pursuing a litigation agenda before the Court

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Speaker 5: that is directed at the court. So you are helping

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Speaker 5: fund one side of many cases that you will be hearing.

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Speaker 5: That would seem to be entirely inappropriate. We wouldn't want

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Speaker 5: a judge to be making contributions to the lawyers on

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Speaker 5: either side, and being a headliner at a gala and

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Speaker 5: boost ticket sales has the same effect.

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Speaker 2: The Court has always been shrouded in secrecy. The public

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Speaker 2: doesn't know how it goes about its work, really, and

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Speaker 2: there's no transparency in this either. There's no way to

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Speaker 2: tell even whether a justice has violated the code, at

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Speaker 2: least until a pro public a story or something comes

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Speaker 2: out about it.

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Speaker 5: So no, this is not at all transparent, and this

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Speaker 5: is going to lead to further erosion of public confidence

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Speaker 5: in the court. Things of this kind that came out

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Speaker 5: in earlier generations ended justice's careers. Justice Abe Fortis was

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Speaker 5: forced off the court or involvements with potential litigants that

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Speaker 5: were far thinner than the ones we're seeing right now,

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Speaker 5: and members of both parties and justices across the ideological

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Speaker 5: spectrum insisted that he stepped down, and he ultimately did.

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Speaker 5: We've completely changed our practices and our ethics standards are

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Speaker 5: not keeping.

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Speaker 2: Up, and it doesn't appear this code is going to

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Speaker 2: help much. Thanks so much, David. That's Professor David Super

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Speaker 2: of Georgetown Law coming up. FTX, investors, sue SBF and celebrities.

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Speaker 2: I'm June Gross. When you're listening to Bloomberg, I.

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Speaker 1: Call it the wheel.

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Speaker 4: I don't think so.

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Speaker 3: What does it do the rules? Yeah?

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Speaker 5: So does a bagel?

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Speaker 2: Okay, a Bengel here can he one of the worst

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Speaker 2: ideas I've ever heard.

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Speaker 1: Like I was saying, it's FTX, it's a safe and

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Speaker 1: easy way to get into the crypto.

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Speaker 5: I don't think so, and I'm never wrong about this stuff.

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Speaker 2: Never remember that Larry David commercial for FTX that had

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Speaker 2: them laughing at the Super Bowl in twenty twenty two.

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Speaker 2: Tom Brady, Giselle Bunchen, Steph Curry, and Shaquille O'Neill were

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Speaker 2: among the celebrities who also chatted the cryptocurrency exchange in commercials.

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Speaker 1: Well.

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Speaker 2: Investors who claimed they lost billions in the collapse of

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Speaker 2: FTX are trying to pin the blame not just on

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Speaker 2: Sam Bankman Freed in his inner circle, but also on

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Speaker 2: the celebrities who were paid to endorse it, as well

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Speaker 2: as its accountants, lawyers, and bankers. Joining me is Braden Perry,

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Speaker 2: a former federal regulatory enforcement attorney and a partner at

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Speaker 2: Kenny Hurtz Perry. So, Braiden tell us about this sweeping

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Speaker 2: class action lawsuit that was filed in Miami federal court.

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Speaker 6: Yeah, so this is a loss that is brought by

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Speaker 6: a number of individuals who, whether investors or had some

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Speaker 6: sort of financial interest in FTX, and they brought it

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Speaker 6: against a number of entities, including celebrity endorsers, accountants, the

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Speaker 6: actual members of FTX itself, as well as others. So

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Speaker 6: it's a wide ranging case that essentially boils down to

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Speaker 6: FTX was falsely providing information to the public and the

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Speaker 6: public somehow either invested or had some sort of financial

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Speaker 6: interest in FTX and therefore were harmed.

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Speaker 2: So let's start with the celebrities, because that's where everyone starts.

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Speaker 6: Correct.

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Speaker 2: So what does the law require of celebrity endorsers?

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Speaker 6: So generally the law requires not much. And what it

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Speaker 6: requires is that the celebrity endorser knows what the product

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Speaker 6: is and how it works. And to that, generally there's

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Speaker 6: some sort of disclaimer, ordinarily at the bottom of the

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Speaker 6: advertisement or elsewhere it indicates celebrity endorser is a paid

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Speaker 6: endorser for that product, as well as the truthfulness and

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Speaker 6: so the endorser cannot provide information that's false or misleading

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Speaker 6: to the public.

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Speaker 2: Does that mean that Jennifer Garner actually has to use

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Speaker 2: the drugstore creams she claims she uses.

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Speaker 6: Generally that's the case, and so you'll see these advertisements

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Speaker 6: with certain restaurants where celebrities are at, or certain products

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Speaker 6: that they're using, and it's not an exclusive use, and

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Speaker 6: so it can be a very high level. So if

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Speaker 6: Jenner Garner has used a product that's been provided to her,

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Speaker 6: she can certainly endorse that product, and so it's not

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Speaker 6: a lifelong or a over the top type of use requirement.

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Speaker 6: But generally, yeah, if the celebrity endorser is going to

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Speaker 6: endorse a product, that celebrity endorsers should be using that product.

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Speaker 2: So does that mean that Tom Brady and Larry David

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Speaker 2: and all the others should have been invested in FTX.

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Speaker 6: Yeah, I don't know if they should have been invested

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Speaker 6: in the FTX. Obviously they should have known what FTX

402
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Speaker 6: is and what it does, and that would likely be

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Speaker 6: their exchange of choice if they were going to be

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Speaker 6: part of the crypto movement. Not necessarysarily a needed part

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Speaker 6: of that movement.

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Speaker 2: That's why I'm wondering, when sophisticated investors didn't know about

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Speaker 2: FTX and the government found out much later, how are

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Speaker 2: celebrities supposed to know?

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Speaker 6: And that's a big question that's going to be the

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Speaker 6: legal question is what did the celebrities know? What influence

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Speaker 6: did they have on these investments? And that's really the

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Speaker 6: crux of the legal argument in this case. The class

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Speaker 6: action is so wide with all the different entities associated

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Speaker 6: with FTX. You know, the accountant standbackmen Freed is one

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Speaker 6: of the defendants. All these celebrity endorsers. Everyone is involved,

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Speaker 6: and so there's going to be from the defense side

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Speaker 6: lots of finger pointing as to who knew what and

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Speaker 6: when and where and how, and so that's really going

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Speaker 6: to be what the plans need to prove, is whether

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Speaker 6: or not these celebrity endorsers were intricate in this false

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Speaker 6: and misleading product.

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Speaker 2: Besides the finger pointing tell us what some lines of defense.

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Speaker 6: Might be, the defense teams have several different lines of defense.

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Speaker 6: You know, they weren't specific to the actual accounts. They

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Speaker 6: didn't provide terms or conditions of the accounts. They weren't

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Speaker 6: detailing what the accounts could or could not do, and

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Speaker 6: so that's general of defense to the claims. However, they

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00:24:14,320 --> 00:24:17,320
Speaker 6: knew or should have known, that there was misleading information

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Speaker 6: by not providing some of that information about these accounts,

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Speaker 6: and that can be counterproductive to their case. Also, if

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Speaker 6: I'm sitting on the defense table and I see that

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Speaker 6: the main group, the head of FTX, has been convicted

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Speaker 6: of crimes, I'm certainly pointing to that saying, hey, these

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Speaker 6: people were committing crimes, were victims just as much as

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Speaker 6: you were.

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Speaker 2: Yeah, So the Sam Bankman freed conviction and the guilty,

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Speaker 2: please of his inner circle should be helpful to the

438
00:24:48,080 --> 00:24:52,520
Speaker 2: defendants here. Now, some of the other targets of the

439
00:24:52,760 --> 00:24:59,040
Speaker 2: lawsuit are professional advisors, ranging from an accounting firm, investment firm,

440
00:24:59,400 --> 00:25:03,800
Speaker 2: and a bank. Those seem like more reasonable defendants to me.

441
00:25:04,880 --> 00:25:08,200
Speaker 6: Yeah, and they should be. And ordinarily, when you look

442
00:25:08,240 --> 00:25:13,160
Speaker 6: at the history of massive frauds in finance, made off

443
00:25:13,200 --> 00:25:15,960
Speaker 6: as the best picture of that, there is still ongoing

444
00:25:16,000 --> 00:25:21,600
Speaker 6: litigation involving countants, professional individuals who had some part of

445
00:25:21,640 --> 00:25:24,520
Speaker 6: his scheme. That's the case here. You know, obviously, the accountants,

446
00:25:24,560 --> 00:25:27,879
Speaker 6: the investment firms, all of these pieces were part of

447
00:25:28,080 --> 00:25:32,480
Speaker 6: the ongoing massive dollars that FTX was bringing in and

448
00:25:32,520 --> 00:25:36,920
Speaker 6: maintaining during its lifetime. And those are the traditional defendants

449
00:25:36,920 --> 00:25:41,240
Speaker 6: you'd see celebrity endorsers Frankly, you don't see that often.

450
00:25:41,640 --> 00:25:44,600
Speaker 6: And a group settled just because likely they didn't want

451
00:25:44,600 --> 00:25:47,120
Speaker 6: to be bothered with the litigation or part of the litigation,

452
00:25:47,480 --> 00:25:50,359
Speaker 6: And there's a valid reason to settle and get out.

453
00:25:50,560 --> 00:25:52,040
Speaker 6: But I think the ones that are still in there

454
00:25:52,080 --> 00:25:55,600
Speaker 6: have relatively valid defenses that one they were victims two

455
00:25:55,640 --> 00:25:59,040
Speaker 6: and two that their endorsements had no input on what

456
00:25:59,240 --> 00:26:02,320
Speaker 6: the actual under line fraud of FDx was about.

457
00:26:02,560 --> 00:26:05,840
Speaker 2: You mentioned the Bernie Madoff investor suits played out for

458
00:26:06,040 --> 00:26:09,760
Speaker 2: well over a decade. Do you think the FDx case

459
00:26:09,840 --> 00:26:14,480
Speaker 2: will be even more complicated to one wine than madeoff was?

460
00:26:15,040 --> 00:26:15,560
Speaker 5: Yeah, I do.

461
00:26:15,760 --> 00:26:18,119
Speaker 6: You know, we've been talking strictly about this one plane

462
00:26:18,119 --> 00:26:20,800
Speaker 6: of case involves a number of celebrity endorsers. You have

463
00:26:20,840 --> 00:26:24,520
Speaker 6: to remember that the criminal case is essentially over. There

464
00:26:24,520 --> 00:26:26,719
Speaker 6: will be appeals, There will be other issues in this,

465
00:26:26,800 --> 00:26:29,480
Speaker 6: although I don't think in the appeals will be successful.

466
00:26:29,600 --> 00:26:32,000
Speaker 6: Then you got the regulatory action, so you got the CFTC,

467
00:26:32,080 --> 00:26:35,840
Speaker 6: you got the sec Ordinarily, within these parallel criminal cases,

468
00:26:36,040 --> 00:26:38,920
Speaker 6: those cases likely will be settled because there's not much

469
00:26:38,960 --> 00:26:42,119
Speaker 6: else to go after. The big issue is going to

470
00:26:42,160 --> 00:26:47,399
Speaker 6: be bankruptcy receiverships in the different jurisdictions and trying to

471
00:26:47,480 --> 00:26:51,400
Speaker 6: claw back as much of this lost money as possible

472
00:26:51,440 --> 00:26:53,919
Speaker 6: to provide to investors. So that's going to be the

473
00:26:53,960 --> 00:26:57,920
Speaker 6: main focus for the next decade is the severship action

474
00:26:58,320 --> 00:27:01,320
Speaker 6: to claw back all this individual funds from all these

475
00:27:01,400 --> 00:27:04,399
Speaker 6: various entities. And then you'll have these civil cases that

476
00:27:04,440 --> 00:27:08,040
Speaker 6: are trying to find those that may not have exposure

477
00:27:08,040 --> 00:27:10,720
Speaker 6: otherwise so these celebrity endorsers, those types of things, and

478
00:27:10,760 --> 00:27:13,320
Speaker 6: so it's going to be complicated. And the fact that

479
00:27:13,560 --> 00:27:18,800
Speaker 6: crypto wasn't regulated like Madoff's Ponzi scheme was. There's no

480
00:27:19,119 --> 00:27:22,040
Speaker 6: central regulator and you get the SEC, you got the

481
00:27:22,040 --> 00:27:25,040
Speaker 6: CFTC that are part of this. But unlike Madeoff where

482
00:27:25,040 --> 00:27:27,760
Speaker 6: you could point directly at the SEC, there's really no

483
00:27:28,200 --> 00:27:31,479
Speaker 6: nexus of jurisdiction between anyone. So it's going to take

484
00:27:31,520 --> 00:27:34,320
Speaker 6: a long time. You know FTX at offices all over

485
00:27:34,359 --> 00:27:37,399
Speaker 6: the place, there's multiple jurisdictions. It will take a while

486
00:27:37,520 --> 00:27:40,640
Speaker 6: to unwind what this is becoming. It could be could

487
00:27:40,680 --> 00:27:42,560
Speaker 6: be longer than what Madoff's looked at.

488
00:27:42,920 --> 00:27:46,520
Speaker 2: And at the sentencing of Sam Bankman, Freed and the

489
00:27:46,600 --> 00:27:50,000
Speaker 2: three people who flipped, will the judge order restitution.

490
00:27:50,240 --> 00:27:52,640
Speaker 6: The way it generally works when it comes to parallel

491
00:27:52,720 --> 00:27:58,399
Speaker 6: criminal slash regulatory slash liquidation proceedings is anything the government gets,

492
00:27:58,400 --> 00:28:02,359
Speaker 6: and so as part of the thing for Sam beckun Free,

493
00:28:02,600 --> 00:28:05,880
Speaker 6: for Carolyn Ellison, for Wang, for all of these individuals,

494
00:28:05,920 --> 00:28:09,720
Speaker 6: there'll be a restitution element as their sins and that

495
00:28:09,800 --> 00:28:14,000
Speaker 6: will go into the bucket of the receiver. So you'll

496
00:28:14,040 --> 00:28:18,120
Speaker 6: likely see any ill gotten gains these individuals received will

497
00:28:18,160 --> 00:28:20,879
Speaker 6: be part of that restitution order under the sentencing that

498
00:28:20,960 --> 00:28:23,640
Speaker 6: will flow into the receivership action that will be part

499
00:28:23,720 --> 00:28:27,520
Speaker 6: of that bucket to provide to investors. So yeah, they

500
00:28:27,560 --> 00:28:31,679
Speaker 6: will likely have large restitution positions as part of their sensing.

501
00:28:31,840 --> 00:28:35,040
Speaker 2: Are there rather competing class action lawsuits? Or has the

502
00:28:35,080 --> 00:28:39,000
Speaker 2: Miami lawsuit been certified as a class.

503
00:28:38,960 --> 00:28:42,840
Speaker 6: When it comes to all of these different actions, the

504
00:28:42,840 --> 00:28:45,959
Speaker 6: priority number one was the criminal case, and while criminal

505
00:28:46,000 --> 00:28:49,240
Speaker 6: case is ongoing, generally all the civil cases are stayed.

506
00:28:49,400 --> 00:28:51,800
Speaker 6: That's the case in the Florida action. At this point

507
00:28:51,840 --> 00:28:56,240
Speaker 6: in time, there's been ongoing discovery about that class action.

508
00:28:56,360 --> 00:28:58,920
Speaker 6: There's not been a decision to certify the class action

509
00:28:59,040 --> 00:29:01,360
Speaker 6: as of yet. Now that the criminal case is over,

510
00:29:01,800 --> 00:29:04,400
Speaker 6: I think all of these courts are going to get

511
00:29:04,440 --> 00:29:07,960
Speaker 6: back in full gear addressing all of these issues now.

512
00:29:08,040 --> 00:29:09,760
Speaker 6: I mean there's going to be a number of evidentiary

513
00:29:09,800 --> 00:29:14,120
Speaker 6: issues from the trial. The vast government investigation could be

514
00:29:14,160 --> 00:29:16,840
Speaker 6: a treasure trove of information for the plaintiffs when it

515
00:29:16,840 --> 00:29:18,840
Speaker 6: comes to these types of things, and so the courts

516
00:29:18,840 --> 00:29:20,719
Speaker 6: are now going to have to face that issue and

517
00:29:20,880 --> 00:29:23,680
Speaker 6: begin moving again procedurally.

518
00:29:23,240 --> 00:29:26,000
Speaker 2: On these cases, and there's always the possibility that some

519
00:29:26,040 --> 00:29:29,480
Speaker 2: of these celebrities might want to settle just to put

520
00:29:29,560 --> 00:29:34,400
Speaker 2: some distance between themselves and SBF. Thanks so much, Braiden.

521
00:29:34,680 --> 00:29:38,200
Speaker 2: That's Braden Perry of Kenny Hurts Perry. Coming up next,

522
00:29:38,720 --> 00:29:42,960
Speaker 2: The Michigan Supreme Court considers false election robocalls. I'm June

523
00:29:43,000 --> 00:29:44,800
Speaker 2: Grasso and you're listening to Bloomberg.

524
00:29:45,920 --> 00:29:49,080
Speaker 7: Mail in voting sounds great, but did you know that

525
00:29:49,200 --> 00:29:52,040
Speaker 7: if you vote by mail, your personal information will be

526
00:29:52,080 --> 00:29:54,760
Speaker 7: part of a public database that will be used by

527
00:29:54,800 --> 00:29:58,160
Speaker 7: police departments to track down old warren and be used

528
00:29:58,160 --> 00:30:01,160
Speaker 7: by credit card companies to collect outstanding debts.

529
00:30:01,800 --> 00:30:04,840
Speaker 2: In the run up to the twenty twenty elections, thousands

530
00:30:04,840 --> 00:30:09,400
Speaker 2: of Detroit residents got that robocall, falsely claiming that police,

531
00:30:09,480 --> 00:30:13,400
Speaker 2: creditors and the CDC could use mail in voting data

532
00:30:13,440 --> 00:30:17,800
Speaker 2: to issue warrants, collect on debts, and push mandatory vaccines.

533
00:30:18,360 --> 00:30:23,080
Speaker 2: The Michigan Attorney General filed felony charges against Conservative operatives

534
00:30:23,160 --> 00:30:27,080
Speaker 2: Jack Berkman and Jacob Wall, accusing them of orchestrating the

535
00:30:27,200 --> 00:30:31,480
Speaker 2: robocalls aimed at suppressing the vote of predominantly black voters

536
00:30:31,480 --> 00:30:34,920
Speaker 2: in Detroit. Berkman and Wall have already been sanctioned in

537
00:30:35,000 --> 00:30:39,360
Speaker 2: other states on similar voter intimidation charges, but they're arguing

538
00:30:39,400 --> 00:30:42,680
Speaker 2: to the Michigan Supreme Court that that state's law is

539
00:30:42,720 --> 00:30:46,320
Speaker 2: too broad to enforce, joining me his First Amendment. Expert

540
00:30:46,480 --> 00:30:50,400
Speaker 2: Eugene Vollick, a professor at UCLA Law School, is this

541
00:30:50,520 --> 00:30:54,840
Speaker 2: conflict the role of the state to protect voters from

542
00:30:54,880 --> 00:31:01,360
Speaker 2: intimidation and the Constitution's protections for speech political speech? Is

543
00:31:01,400 --> 00:31:04,600
Speaker 2: this at the heart of a lot of US election laws.

544
00:31:04,920 --> 00:31:08,400
Speaker 3: Depends what you mean by intimidation. So there's no doubt

545
00:31:08,600 --> 00:31:12,720
Speaker 3: that trying to intimidate voters by threatening violence against them

546
00:31:13,040 --> 00:31:15,920
Speaker 3: is a crime, and there's no First Amendment defense for

547
00:31:16,080 --> 00:31:19,800
Speaker 3: threats of violence. On the other hand, courts have generally

548
00:31:19,840 --> 00:31:23,680
Speaker 3: been quite skeptical, especially in recent years, of attempts to

549
00:31:23,840 --> 00:31:28,160
Speaker 3: police false statements in election campaigns. So there have been

550
00:31:28,280 --> 00:31:33,280
Speaker 3: laws that ban knowingly full statements in election campaigns, outright lies,

551
00:31:33,320 --> 00:31:36,120
Speaker 3: and the courts still have struck down those laws, chiefly

552
00:31:36,200 --> 00:31:39,440
Speaker 3: because they basically put too much power in the government's

553
00:31:39,520 --> 00:31:42,320
Speaker 3: hands to decide what is true and what is false

554
00:31:42,360 --> 00:31:45,120
Speaker 3: in an election campaign, with too much risk of kind

555
00:31:45,120 --> 00:31:49,200
Speaker 3: of political enforcement. And part of the problem with the

556
00:31:49,400 --> 00:31:52,520
Speaker 3: law in this case is that, at least in the

557
00:31:52,560 --> 00:31:57,360
Speaker 3: government's understanding of it, it applies to basically trying to

558
00:31:57,960 --> 00:32:01,440
Speaker 3: get people not to voter to vote differently through either

559
00:32:01,680 --> 00:32:07,080
Speaker 3: possibly misleading statements about possible risks to them, or perhaps

560
00:32:07,240 --> 00:32:10,800
Speaker 3: any statements that essentially use fear in order to change

561
00:32:10,800 --> 00:32:15,120
Speaker 3: people's votes. That's a very broad category, especially given that

562
00:32:15,160 --> 00:32:18,840
Speaker 3: the statute here talks about attempt by means of menace

563
00:32:19,000 --> 00:32:23,000
Speaker 3: or other corrupt means or device to influence an elector's vote.

564
00:32:23,240 --> 00:32:27,000
Speaker 3: So it looks like, under the government's theory, if there

565
00:32:27,200 --> 00:32:30,760
Speaker 3: was a message sent out saying, if you vote for Trump,

566
00:32:31,400 --> 00:32:35,880
Speaker 3: he's going to send your children off to some war,

567
00:32:36,000 --> 00:32:39,320
Speaker 3: let's say that's an attempt to use fear. It's possibly

568
00:32:39,360 --> 00:32:42,560
Speaker 3: an attempt to use misleading statements he's going to do that.

569
00:32:42,640 --> 00:32:44,760
Speaker 3: How do we know he's going to do that? So

570
00:32:45,320 --> 00:32:48,760
Speaker 3: generally speaking, most courts would say that's not something that

571
00:32:48,840 --> 00:32:52,320
Speaker 3: the government can police for in elections, And yet under

572
00:32:52,400 --> 00:32:55,760
Speaker 3: the state's theory in this case, it's possible that the

573
00:32:55,840 --> 00:32:57,480
Speaker 3: law is as broad as that.

574
00:32:58,520 --> 00:33:02,040
Speaker 2: During the oral argument, some of the Michigan justices questioned

575
00:33:02,320 --> 00:33:06,600
Speaker 2: the application of the statute. Justice Elizabeth Welch asked, what

576
00:33:06,720 --> 00:33:09,440
Speaker 2: about the scenario of the millions of mailers we get.

577
00:33:09,600 --> 00:33:12,920
Speaker 2: What if someone says, don't vote, they're all crooks? And

578
00:33:13,200 --> 00:33:17,000
Speaker 2: Justice David Viviano asked whether the law could be used

579
00:33:17,040 --> 00:33:20,440
Speaker 2: to charge someone like Trump over his frequent statements that

580
00:33:20,520 --> 00:33:24,160
Speaker 2: the absentee voting process is rigged. So does it seem

581
00:33:24,200 --> 00:33:28,240
Speaker 2: like the justices were keying in to what you just said, right?

582
00:33:28,400 --> 00:33:30,600
Speaker 3: I think the justices are worried that the statute in

583
00:33:30,640 --> 00:33:34,440
Speaker 3: its face is very broad, and indeed claims don't vote

584
00:33:34,480 --> 00:33:38,680
Speaker 3: by absentee. The absentee process is rigged. Under the government's theory.

585
00:33:38,720 --> 00:33:40,800
Speaker 3: They may not be menacing in the sense that they

586
00:33:40,800 --> 00:33:43,600
Speaker 3: don't have the element of possible threat that the government

587
00:33:43,600 --> 00:33:46,240
Speaker 3: will do something to you. But under the government's theory,

588
00:33:46,480 --> 00:33:49,200
Speaker 3: that would be a corrupt means or device, because it

589
00:33:49,240 --> 00:33:53,160
Speaker 3: would be misleading or outright fall So I think the

590
00:33:53,280 --> 00:33:57,280
Speaker 3: justices are recognizing that the statute has written quite broadly.

591
00:33:57,640 --> 00:34:01,560
Speaker 3: It may well be that a narrower stack would be constitutional.

592
00:34:01,720 --> 00:34:03,760
Speaker 3: It may well be that there's a narrow of statue

593
00:34:03,800 --> 00:34:06,800
Speaker 3: that would be both constitutionals and broad enough to cover

594
00:34:07,080 --> 00:34:10,319
Speaker 3: the speech of these particular defendants. But I'm not sure

595
00:34:10,360 --> 00:34:12,080
Speaker 3: that this statute is one side check.

596
00:34:12,280 --> 00:34:15,840
Speaker 2: Well, I noticed the defendant incited you in their brief, Eugene,

597
00:34:16,000 --> 00:34:19,480
Speaker 2: so we'll see if the Michigan Supreme Court agrees. Thanks

598
00:34:19,520 --> 00:34:21,920
Speaker 2: so much for being on the show. That's Professor Eugene

599
00:34:22,000 --> 00:34:24,680
Speaker 2: Vulloch of UCLA Law School, and that's it for this

600
00:34:24,840 --> 00:34:27,560
Speaker 2: edition of The Bloomberg Law Show. Remember you can always

601
00:34:27,600 --> 00:34:30,520
Speaker 2: get the latest legal news on our Bloomberg Law Podcast.

602
00:34:30,800 --> 00:34:33,839
Speaker 2: You can find them on Apple Podcasts, Spotify, and at

603
00:34:34,000 --> 00:34:38,960
Speaker 2: www dot bloomberg dot com slash podcast slash Law, And

604
00:34:39,080 --> 00:34:42,160
Speaker 2: remember to tune into The Bloomberg Law Show every weeknight

605
00:34:42,239 --> 00:34:45,680
Speaker 2: at ten pm Wall Street Time. I'm June Grosso, and

606
00:34:45,760 --> 00:34:47,200
Speaker 2: you're listening to Bloomberg