1 00:00:03,480 --> 00:00:07,560 Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every 2 00:00:07,640 --> 00:00:10,440 Speaker 1: day we bring you insight and analysis into the most 3 00:00:10,480 --> 00:00:13,440 Speaker 1: important legal news of the day. You can find more 4 00:00:13,480 --> 00:00:18,000 Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud, 5 00:00:18,320 --> 00:00:22,640 Speaker 1: and on Bloomberg dot com slash podcasts. The Republican majority 6 00:00:22,680 --> 00:00:25,880 Speaker 1: of the House Intelligence Committee voted yesterday to seek release 7 00:00:25,920 --> 00:00:29,520 Speaker 1: of a Republican memo based on classified information. The memo 8 00:00:29,560 --> 00:00:31,800 Speaker 1: has passed from the House Committee to President Trump for 9 00:00:31,840 --> 00:00:36,000 Speaker 1: a required review for national security. Associate Attorney General Stephen 10 00:00:36,000 --> 00:00:39,040 Speaker 1: Boyd warned last week that it would be quote extraordinarily 11 00:00:39,159 --> 00:00:43,159 Speaker 1: reckless to release the memo. According to Bloomberg News, President 12 00:00:43,159 --> 00:00:46,320 Speaker 1: Trump erupted in anger while traveling to Davos on Air 13 00:00:46,360 --> 00:00:49,240 Speaker 1: Force one last week when he learned about Boyd's warning. 14 00:00:49,840 --> 00:00:53,599 Speaker 1: Also on Monday, FBI Direputy Director Andrew McCabe, who has 15 00:00:53,640 --> 00:00:57,200 Speaker 1: been the subject of blistering criticism from Trump, stepped down 16 00:00:57,240 --> 00:00:59,760 Speaker 1: and we'll be on leave until he retires sometime in 17 00:00:59,800 --> 00:01:03,520 Speaker 1: the spring. Joining me is Jimmy Garule, professor at Notre 18 00:01:03,640 --> 00:01:07,240 Speaker 1: Dame University Law School. Jimmy, what do we know about 19 00:01:07,280 --> 00:01:12,920 Speaker 1: the memo and why they're such a push to release it. Well, unfortunately, 20 00:01:12,959 --> 00:01:16,280 Speaker 1: we don't know a lot because, first of all, the 21 00:01:16,760 --> 00:01:21,399 Speaker 1: memo was based on unclassified information, and even members of 22 00:01:21,480 --> 00:01:24,639 Speaker 1: the House Intelligence Committee, at least on the Democratic side, 23 00:01:24,959 --> 00:01:30,640 Speaker 1: have been prohibited prevented from seeing the underlying classified information 24 00:01:31,080 --> 00:01:35,120 Speaker 1: upon which this four page memo is based. Further, the 25 00:01:35,319 --> 00:01:38,200 Speaker 1: memo has not been shared on the Senate side with 26 00:01:38,319 --> 00:01:41,320 Speaker 1: the Senate Intelligence Committee, with the chairman and vice chairman 27 00:01:41,680 --> 00:01:45,080 Speaker 1: of that committee either, and so we're left to kind 28 00:01:45,120 --> 00:01:48,560 Speaker 1: of speculate, you know, what, what's lated or or at 29 00:01:48,600 --> 00:01:51,880 Speaker 1: least how the memo has been described, as it suggests 30 00:01:51,920 --> 00:01:55,360 Speaker 1: that there may have been some abuse of power with 31 00:01:55,640 --> 00:01:58,840 Speaker 1: by the Department of Justice and the FBI with respect 32 00:01:58,880 --> 00:02:02,680 Speaker 1: to getting a vice of war at against a former 33 00:02:02,800 --> 00:02:10,240 Speaker 1: policy advisor, Carter Page, who worked on the Trump presidential campaign. Now, 34 00:02:10,720 --> 00:02:13,959 Speaker 1: we should mention that FISA warrants the information is presented 35 00:02:14,000 --> 00:02:18,080 Speaker 1: to a judge, and the judges are pretty pretty good 36 00:02:18,120 --> 00:02:22,600 Speaker 1: to figure out what's necessary, especially when you're looking for surveillance. 37 00:02:23,160 --> 00:02:27,959 Speaker 1: Um And apparently the ranking Democrat on the panel, Adam 38 00:02:28,080 --> 00:02:31,800 Speaker 1: ship Shift, has said that the Republicans refused a request 39 00:02:31,919 --> 00:02:34,680 Speaker 1: from the FBI director to brief the panel about the 40 00:02:34,720 --> 00:02:37,920 Speaker 1: release of the document. Just how was the memo declassified? 41 00:02:37,960 --> 00:02:40,919 Speaker 1: It's based on classified information. Well, it hasn't been any 42 00:02:41,000 --> 00:02:43,560 Speaker 1: classified and that's the problem. It's now been submitted to 43 00:02:43,800 --> 00:02:46,840 Speaker 1: the to the White House, to the President, to President Trump. 44 00:02:47,200 --> 00:02:49,600 Speaker 1: And of course the president has the power, He has 45 00:02:49,600 --> 00:02:53,840 Speaker 1: the authority to classify material if he believes that it's 46 00:02:53,960 --> 00:02:57,280 Speaker 1: it's disclosure could threaten national security. At the same time, 47 00:02:57,320 --> 00:03:01,040 Speaker 1: he has the authority to declassify information should again if 48 00:03:01,040 --> 00:03:05,960 Speaker 1: he concludes that declassification would not threaten national security interests. 49 00:03:05,960 --> 00:03:10,200 Speaker 1: So that's where the the the infamous memo presently sits. It. 50 00:03:10,200 --> 00:03:13,959 Speaker 1: It's in the possession of the White House awaiting President 51 00:03:14,000 --> 00:03:17,000 Speaker 1: Trump to make a decision on whether the information should 52 00:03:17,000 --> 00:03:19,920 Speaker 1: be to class should be a declassified and the memo 53 00:03:20,000 --> 00:03:23,320 Speaker 1: itself should be released to the public. Um. So that's 54 00:03:23,360 --> 00:03:28,240 Speaker 1: the precarious situation that that this memo currently finds. The 55 00:03:28,240 --> 00:03:32,120 Speaker 1: current situation involving the memo. Have you heard of a 56 00:03:32,200 --> 00:03:37,400 Speaker 1: situation like this before? Totally unprecedented, absolutely unprecedented. You know. 57 00:03:37,440 --> 00:03:40,640 Speaker 1: The justification for this, at least on the on the 58 00:03:40,680 --> 00:03:44,000 Speaker 1: Republican side in the House has been, well, we're simply 59 00:03:44,480 --> 00:03:50,240 Speaker 1: fulfilling our oversight responsibilities with respective overseeing the FBI and 60 00:03:50,440 --> 00:03:53,960 Speaker 1: d o J. But this type of oversight, which involves 61 00:03:54,440 --> 00:03:58,840 Speaker 1: a particular action in this case, the the the application 62 00:03:58,880 --> 00:04:02,480 Speaker 1: for a vice a warrant against a specific individual Carter 63 00:04:02,640 --> 00:04:09,200 Speaker 1: page with respect to a specific investigation, the Russia investigation, 64 00:04:09,960 --> 00:04:15,120 Speaker 1: and the committee, the House Intelligence Committee releasing information on 65 00:04:15,200 --> 00:04:20,960 Speaker 1: that is unprecedented. You know, oversight usually involves all maybe 66 00:04:20,960 --> 00:04:23,720 Speaker 1: if there's some concern about a statute, or how d 67 00:04:23,839 --> 00:04:26,960 Speaker 1: o J or the FBI is interpreting a particular statute 68 00:04:27,160 --> 00:04:29,800 Speaker 1: and the statute needs to be amended, or if there's 69 00:04:29,839 --> 00:04:34,200 Speaker 1: some you know, broader UH concerns that then certainly the 70 00:04:34,279 --> 00:04:38,400 Speaker 1: House would engage in oversight on a broader UH in 71 00:04:38,440 --> 00:04:41,159 Speaker 1: a more global scale. But but but to focus on 72 00:04:41,200 --> 00:04:44,840 Speaker 1: a specific case and specific individual in the case, it 73 00:04:45,080 --> 00:04:49,880 Speaker 1: is absolutely in precedent. And furthermore, to disclose UH, the 74 00:04:50,000 --> 00:04:52,720 Speaker 1: existence of a fife, the one which is you know, 75 00:04:53,760 --> 00:04:57,520 Speaker 1: is secreted in nature. In fact, it's against the law 76 00:04:57,760 --> 00:05:02,240 Speaker 1: for a recipient of a ICE A warrant to disclose 77 00:05:03,080 --> 00:05:08,760 Speaker 1: to the target that he or she is is under surveillance. UH. 78 00:05:09,040 --> 00:05:10,640 Speaker 1: That would be a violation of the law, and here 79 00:05:10,680 --> 00:05:14,760 Speaker 1: we have these House members that are that are disclosing 80 00:05:15,320 --> 00:05:22,240 Speaker 1: this type of a very sensitive information. Now, President Trump 81 00:05:22,360 --> 00:05:25,320 Speaker 1: met with Attorney General Sessions and the FBI director on 82 00:05:25,360 --> 00:05:28,600 Speaker 1: Monday to discuss text messages between the two FBI agents 83 00:05:28,600 --> 00:05:31,440 Speaker 1: that we've heard about. White House Chief of Staff John 84 00:05:31,560 --> 00:05:36,320 Speaker 1: Kelly call Sessions directly to complain about the letter from 85 00:05:36,360 --> 00:05:41,159 Speaker 1: Stephen Boyd which warned about extraordinarily reckless behavior to renace 86 00:05:41,200 --> 00:05:45,720 Speaker 1: the memo, and um he also spoke to others. Is 87 00:05:45,839 --> 00:05:49,919 Speaker 1: this close? Is this interference with the FBI and the 88 00:05:50,000 --> 00:05:54,039 Speaker 1: Justice Department unusual or does it happen with a lot 89 00:05:54,080 --> 00:05:56,920 Speaker 1: of presidents? Now? I think it is unusual. I think 90 00:05:56,920 --> 00:06:00,640 Speaker 1: one of the hallmarks of American democracy is that not 91 00:06:00,720 --> 00:06:03,400 Speaker 1: only do we have an independent judiciary, but we have 92 00:06:03,520 --> 00:06:07,520 Speaker 1: an independent Department of Justice and and the FBI. And 93 00:06:07,560 --> 00:06:12,680 Speaker 1: what that independence means is that investigations and prosecutions should 94 00:06:12,680 --> 00:06:16,360 Speaker 1: be conducted on the facts, on the merits, not not 95 00:06:16,480 --> 00:06:20,160 Speaker 1: for political reasons, and and who to prosecutor who to 96 00:06:20,279 --> 00:06:25,000 Speaker 1: investigate or who not to investigate shouldn't be influenced by 97 00:06:25,400 --> 00:06:30,880 Speaker 1: political partisan considerations. And that's clearly what we've seen with 98 00:06:31,000 --> 00:06:35,640 Speaker 1: the Trump administration. With respect to the Russia investigation. You know, 99 00:06:35,760 --> 00:06:39,360 Speaker 1: first the president has decided who he wants to head 100 00:06:39,440 --> 00:06:45,000 Speaker 1: up the investigation by firing uh. Former at THEI director 101 00:06:45,040 --> 00:06:47,440 Speaker 1: called me he doesn't he didn't want him to to 102 00:06:47,680 --> 00:06:50,840 Speaker 1: head up the investigation, and now he's hand tacked his 103 00:06:50,839 --> 00:06:53,919 Speaker 1: his successor and will have to leave it there. But 104 00:06:54,000 --> 00:06:56,400 Speaker 1: we'll have, I'm sure a lot more to talk about 105 00:06:56,440 --> 00:07:00,440 Speaker 1: when this u when more of this evolves. That's Jimmy Garule. 106 00:07:00,600 --> 00:07:08,000 Speaker 1: He's a professor at Notre Dame University Law School. You've 107 00:07:08,000 --> 00:07:11,920 Speaker 1: heard all the warnings about bitcoin. Here's Vanguard Group founder 108 00:07:12,040 --> 00:07:15,920 Speaker 1: Jack Bogel. It's a speculation I'd avoided like the plague. 109 00:07:16,400 --> 00:07:19,000 Speaker 1: So it was only a matter of time until bitcoin 110 00:07:19,120 --> 00:07:22,600 Speaker 1: made its way into a federal court case. Prosecutors have 111 00:07:22,720 --> 00:07:26,920 Speaker 1: charged Brooklyn businessman maxims Aslovsky in what's believed to be 112 00:07:26,960 --> 00:07:30,560 Speaker 1: the first criminal case focusing on an initial coin offering. 113 00:07:30,920 --> 00:07:33,640 Speaker 1: But it's still unclear if the government has the authority 114 00:07:33,720 --> 00:07:37,360 Speaker 1: to regulate cybercurrency offerings. Here to help me sort it 115 00:07:37,360 --> 00:07:40,000 Speaker 1: out is Peter Handing, a professor at Wayne State University 116 00:07:40,040 --> 00:07:44,160 Speaker 1: Law School and a former sec and Justice Department lawyer. Peter, 117 00:07:44,360 --> 00:07:49,000 Speaker 1: what's the case against Aslavsky, Well, this is it's not bitcoin, 118 00:07:49,200 --> 00:07:52,400 Speaker 1: but in another a different thing that's called an initial 119 00:07:52,600 --> 00:07:56,320 Speaker 1: coin offering. And in fact, the SEC file case just 120 00:07:56,400 --> 00:08:00,440 Speaker 1: today or just became publicized today to try to shut 121 00:08:00,440 --> 00:08:04,200 Speaker 1: down another coin offering. This is where a company issues 122 00:08:04,360 --> 00:08:07,840 Speaker 1: these tokens and they'll give them a label that makes 123 00:08:07,880 --> 00:08:11,800 Speaker 1: it sound like bitcoin, and they have a value that 124 00:08:11,840 --> 00:08:16,560 Speaker 1: can be redeemed at the company, and so it bears 125 00:08:16,600 --> 00:08:19,880 Speaker 1: at least some similarity to Bitcoin, but it's coming from 126 00:08:19,880 --> 00:08:23,560 Speaker 1: a company rather than Bitcoin, which is not affiliated with 127 00:08:23,640 --> 00:08:27,200 Speaker 1: any particular issue and is trying to become a new 128 00:08:27,240 --> 00:08:30,240 Speaker 1: type of currency, much like you know, the dollar or 129 00:08:30,280 --> 00:08:33,960 Speaker 1: the euro. So what's the fundamental issue that the judge 130 00:08:34,000 --> 00:08:37,719 Speaker 1: has to decide before the case can move forward. Well, 131 00:08:37,760 --> 00:08:44,240 Speaker 1: the key question is whether these initial coin offerings are securities. Uh. 132 00:08:44,320 --> 00:08:47,280 Speaker 1: In order for the SEC to even have jurisdiction to 133 00:08:47,360 --> 00:08:50,520 Speaker 1: pursue a claim, there has to be a determination that 134 00:08:50,559 --> 00:08:54,479 Speaker 1: it's a security, and that's defined in the federal securities 135 00:08:54,559 --> 00:08:58,640 Speaker 1: laws and very broad definitions. And what the SEC is 136 00:08:58,880 --> 00:09:01,520 Speaker 1: probably going to our you and I expect they'll argue 137 00:09:01,720 --> 00:09:06,240 Speaker 1: is that these coin offerings are really what are called 138 00:09:06,320 --> 00:09:10,360 Speaker 1: investment contracts. In other words, people put money in expecting 139 00:09:10,400 --> 00:09:14,360 Speaker 1: that the coins will increase in value, and therefore it's 140 00:09:14,480 --> 00:09:17,680 Speaker 1: like an investment, say in a stock or a bond. 141 00:09:17,800 --> 00:09:21,240 Speaker 1: But the judge says it's not a security, then it's 142 00:09:21,280 --> 00:09:24,600 Speaker 1: out as far as the SEC is concerned. Tell us 143 00:09:24,600 --> 00:09:30,199 Speaker 1: about the Supreme Court case from involving Orange Grove contracts 144 00:09:30,240 --> 00:09:34,600 Speaker 1: that may come into play. Well, that's the SEC versus 145 00:09:34,679 --> 00:09:39,480 Speaker 1: Howe is the case in which the company owned orange 146 00:09:39,480 --> 00:09:45,160 Speaker 1: groves in Florida and sold to UH investors, mainly tourists 147 00:09:45,160 --> 00:09:48,319 Speaker 1: who were coming to Florida, saying here's your little slice 148 00:09:48,320 --> 00:09:53,000 Speaker 1: of the Sunshine State and give us your money. We 149 00:09:53,120 --> 00:09:55,480 Speaker 1: will and if you want, also, you can have a 150 00:09:55,520 --> 00:09:58,719 Speaker 1: service contract where we will harvest the oranges for you 151 00:09:59,160 --> 00:10:02,480 Speaker 1: and give you a of the profits. Now, oranges don't 152 00:10:02,600 --> 00:10:07,160 Speaker 1: sound like a security, but under this label investment contract 153 00:10:07,160 --> 00:10:10,520 Speaker 1: probably the broadest one in the definition of a security 154 00:10:10,600 --> 00:10:14,319 Speaker 1: that the Supreme Court said that is an investment contract 155 00:10:14,320 --> 00:10:17,559 Speaker 1: because you're depending on other people to make money off 156 00:10:17,679 --> 00:10:22,120 Speaker 1: of your investment, and therefore it's subject to SEC rules. 157 00:10:22,160 --> 00:10:25,360 Speaker 1: Probably the most important rule is if it's a security, 158 00:10:25,480 --> 00:10:28,160 Speaker 1: you have to register it with the Commission and include 159 00:10:28,200 --> 00:10:32,800 Speaker 1: financial statements and things like that a very onerous process, 160 00:10:32,960 --> 00:10:36,680 Speaker 1: so it extended the jurisdiction of the sec in the 161 00:10:36,720 --> 00:10:42,439 Speaker 1: Howie case. So in your view, are these securities? Well 162 00:10:43,160 --> 00:10:46,360 Speaker 1: that very good question. Um, I hate to substitute my 163 00:10:46,440 --> 00:10:50,199 Speaker 1: judgment for that of a judge, but they sure sound 164 00:10:50,240 --> 00:10:53,600 Speaker 1: like securities. Where they're being it's a company that's issuing 165 00:10:53,640 --> 00:10:56,679 Speaker 1: them and they're saying these are going to increase in 166 00:10:56,800 --> 00:11:00,000 Speaker 1: value or allow you to buy more and more services, 167 00:11:00,520 --> 00:11:03,680 Speaker 1: and they are issued as a way to help fund 168 00:11:03,760 --> 00:11:09,800 Speaker 1: the company. And that sounds an awful lot like a security. Um. Now, 169 00:11:10,160 --> 00:11:14,599 Speaker 1: different coin offerings are going to have different variations, but 170 00:11:15,480 --> 00:11:17,840 Speaker 1: at the starting point in the sec is taking the 171 00:11:17,920 --> 00:11:22,719 Speaker 1: position UH Chairman Clayton has said, these sure look like securities, 172 00:11:22,760 --> 00:11:25,800 Speaker 1: and we're going to start policing this area of the market. 173 00:11:26,240 --> 00:11:30,000 Speaker 1: So it's not bitcoin, but it's things that are masquerading 174 00:11:30,559 --> 00:11:35,640 Speaker 1: or sounding like cryptocurrencies along the lines of bitcoin. So 175 00:11:36,160 --> 00:11:40,319 Speaker 1: there there's another case in Brooklyn Federal Court where a 176 00:11:40,400 --> 00:11:43,560 Speaker 1: judge is being asked to rule on how cryptocurrencies and 177 00:11:43,720 --> 00:11:46,280 Speaker 1: I c O should be treated under US laws. Tell 178 00:11:46,320 --> 00:11:48,720 Speaker 1: us a little bit about that case. Well, one of 179 00:11:48,760 --> 00:11:51,600 Speaker 1: the issues there is that it was if if it's 180 00:11:51,640 --> 00:11:56,160 Speaker 1: the one that you're mentioning that I'm thinking of, is, yes, 181 00:11:56,240 --> 00:12:00,120 Speaker 1: the Canadian company. And there is also an issue you 182 00:12:00,280 --> 00:12:05,080 Speaker 1: under federal securities laws is doesn't reach transactions outside the 183 00:12:05,160 --> 00:12:11,880 Speaker 1: United States. Now, if these uh coin offerings are offered 184 00:12:11,920 --> 00:12:16,600 Speaker 1: to or purchased by American investors, then the SEC can 185 00:12:16,800 --> 00:12:21,199 Speaker 1: usually step in. But this is where things get nebulous. 186 00:12:21,320 --> 00:12:23,680 Speaker 1: Is it a security? Where is it being offered? And 187 00:12:23,720 --> 00:12:27,239 Speaker 1: often on these websites they say no U S citizens 188 00:12:27,280 --> 00:12:30,839 Speaker 1: can buy, so please US citizens don't do it, But 189 00:12:30,880 --> 00:12:34,080 Speaker 1: then they don't check anymore to make sure American citizens 190 00:12:34,120 --> 00:12:39,000 Speaker 1: aren't doing it, so that could give the SEC jurisdiction 191 00:12:39,080 --> 00:12:41,640 Speaker 1: over it. Noticed, this is all getting fought out before 192 00:12:41,679 --> 00:12:45,040 Speaker 1: we determine whether, in fact, there was any fraud. So 193 00:12:45,440 --> 00:12:47,880 Speaker 1: it's these preliminary rounds that are really going to be 194 00:12:47,920 --> 00:12:52,040 Speaker 1: the key. So courts and other jurisdictions aren't required to 195 00:12:52,160 --> 00:12:56,120 Speaker 1: follow what a Brooklyn federal judge decides, but might they 196 00:12:56,160 --> 00:12:59,960 Speaker 1: look at it? I suspect they would. The federal disc 197 00:13:00,040 --> 00:13:05,240 Speaker 1: records in Brooklyn and Manhattan are the leading courts for 198 00:13:05,800 --> 00:13:11,360 Speaker 1: securities cases, and uh, this is the SEC coming in there. 199 00:13:11,400 --> 00:13:14,680 Speaker 1: And if the Justice Department gets involved in any criminal cases. 200 00:13:15,520 --> 00:13:19,520 Speaker 1: I expect that we will see a fairly uniform approach, 201 00:13:19,559 --> 00:13:23,280 Speaker 1: at least to these initial coin offerings. But there's always 202 00:13:23,280 --> 00:13:25,080 Speaker 1: that risk that you could have a judge in one 203 00:13:25,200 --> 00:13:29,760 Speaker 1: jurisdiction saying one thing, judge in another saying something completely different, 204 00:13:29,840 --> 00:13:31,920 Speaker 1: and then you've got to try to figure out a 205 00:13:31,920 --> 00:13:34,320 Speaker 1: way to reconcile. And ultimately this may be up to 206 00:13:34,400 --> 00:13:38,200 Speaker 1: Congress to reconcile. That might be the better body, assuming 207 00:13:38,240 --> 00:13:41,920 Speaker 1: they could ever pass a law. Confusion in the law, Peter, Really, Uh, 208 00:13:42,360 --> 00:13:45,400 Speaker 1: what a shock. That's what lawyers are for to to 209 00:13:45,480 --> 00:13:47,880 Speaker 1: figure out where's Thanks so much for that, Peter. That's 210 00:13:47,920 --> 00:13:51,080 Speaker 1: Peter Hanning, a professor at Wayne State University Law School. 211 00:13:51,480 --> 00:13:54,439 Speaker 1: Thanks for listening to the Bloomberg Law Podcast. You can 212 00:13:54,480 --> 00:13:58,200 Speaker 1: subscribe and listen to the show on Apple Podcasts, SoundCloud, 213 00:13:58,280 --> 00:14:02,160 Speaker 1: and on Bloomberg dot com sh podcast. I'm June Brosso. 214 00:14:02,640 --> 00:14:09,840 Speaker 1: This is Bloomberg m HM.