WEBVTT - Student Athletes Get Scammed in NIL Deals 0:00:03.200 --> 0:00:08.000 This is Bloomberg Law with June Brusso from Bloomberg Radio. 0:00:08.720 --> 0:00:11.399 I think it's extremely important. I think everybody deserves a 0:00:11.440 --> 0:00:15.240 shot and deserves a chance and the opportunity to play sport. Everybody, 0:00:15.320 --> 0:00:17.639 every little kid should have the opportunity to play sport 0:00:17.680 --> 0:00:19.120 because it can really change your life. 0:00:19.720 --> 0:00:23.759 Playing sports has certainly changed Paige Becker's life. The Yukon 0:00:23.880 --> 0:00:27.840 Husky Star has signed deals with Gatorade, StockX Cheg, and 0:00:28.000 --> 0:00:32.240 Kroc since the new NCAA rules that allow college athletes 0:00:32.280 --> 0:00:35.279 to make money off their name, image, and likeness. There 0:00:35.280 --> 0:00:37.879 are plenty of stories about the six figure deals for 0:00:38.040 --> 0:00:42.040 star college athletes with massive social media following, but the 0:00:42.120 --> 0:00:45.680 majority of college students benefiting from the new rules are 0:00:45.680 --> 0:00:50.000 making small, one off agreements without help from expensive lawyers 0:00:50.080 --> 0:00:54.320 or agents, and that's led to exploitation and students getting 0:00:54.440 --> 0:01:00.000 ripped off by disreputable agents, questionable business deals, bad contracts, 0:01:00.280 --> 0:01:04.280 outright scams. Joining me is Nicole Sadik, a reporter with 0:01:04.319 --> 0:01:08.440 Bloomberg Law who's investigated this new era of college sports. 0:01:09.240 --> 0:01:12.800 Tell us what happened to Savannah Shane here when she 0:01:13.040 --> 0:01:16.240 was fresh off a second place team finish at the 0:01:16.360 --> 0:01:19.920 NCAA Gymnastics Championship last year. 0:01:20.760 --> 0:01:24.880 So Savannah Shanehare is a former gymnast at the University 0:01:24.880 --> 0:01:29.000 of Florida and she'd nearly been scammed doing what she 0:01:29.080 --> 0:01:32.360 thought was an nil deal. The long story short is, 0:01:32.800 --> 0:01:35.920 she was asked to participate in a photo shoot where 0:01:36.360 --> 0:01:39.800 she would be modeling a New York brand's clothing. It 0:01:39.880 --> 0:01:42.000 turned out the person who had reached out to her 0:01:42.200 --> 0:01:44.640 was a scammer, and they sent her a fraudulent check. 0:01:45.000 --> 0:01:48.160 And Savannah's story is really just one example of a 0:01:48.280 --> 0:01:52.600 larger issue today with college athletics, which is that nil 0:01:52.720 --> 0:01:55.560 deals or what appeared to be nil deals, can be 0:01:55.680 --> 0:01:57.080 abusive and exploitative. 0:01:57.640 --> 0:02:00.680 That was just an outright scam that happened to but 0:02:00.800 --> 0:02:05.520 there are other kinds of exploitation, like in contracts. 0:02:06.160 --> 0:02:09.280 Absolutely, one of the biggest red flags that I heard 0:02:09.320 --> 0:02:13.519 from some different lawyers that I spoke to is contracts 0:02:13.560 --> 0:02:18.320 where companies are asking students to sign away their intellectual 0:02:18.360 --> 0:02:21.880 property rights. Imagine you are a student athlete and you're 0:02:21.919 --> 0:02:25.480 doing brand promotion on Instagram for you know, let's say 0:02:25.480 --> 0:02:28.280 a shoe brand. You'll post a picture of you wearing 0:02:28.320 --> 0:02:31.720 that shoe, and if you've signed away your intellectual property rights. 0:02:31.720 --> 0:02:33.960 In some cases, that could mean that the company can 0:02:34.080 --> 0:02:36.480 continue to use that photo of you, you know, for 0:02:36.520 --> 0:02:39.480 as long as they want, in perpetuity. And so if 0:02:39.520 --> 0:02:42.239 you were to go pro after college and your market 0:02:42.320 --> 0:02:45.079 value increases, you know, the commission you'd be getting or 0:02:45.080 --> 0:02:48.320 the royalties you'd be getting from that photo wouldn't really 0:02:48.360 --> 0:02:50.720 be equitable to your market value. 0:02:50.919 --> 0:02:54.200 So they ask them to sign away their intellectual property 0:02:54.280 --> 0:02:55.640 rights in perpetuity. 0:02:55.960 --> 0:02:59.119 That has been sometimes the case. Of course, not every 0:02:59.240 --> 0:03:01.680 nil deal has had this. This is sort of, you know, 0:03:01.800 --> 0:03:04.040 the biggest red flag, but it certainly happens. 0:03:04.480 --> 0:03:06.639 You got a hold of a couple of these contracts. 0:03:06.880 --> 0:03:08.920 Tell us about the one where the company would take 0:03:09.040 --> 0:03:12.880 forty percent of the revenue of merchandise sales, a rate 0:03:13.040 --> 0:03:15.720 one lawyer described as obscene. 0:03:16.120 --> 0:03:20.679 It was this Texas merchandise company, and in the contract 0:03:20.760 --> 0:03:22.840 it said that the company would keep at least forty 0:03:22.880 --> 0:03:26.120 percent of the revenue from the merchandise sales. That's a 0:03:26.360 --> 0:03:30.960 huge commission. But what's really interesting about this contract is 0:03:30.960 --> 0:03:34.000 that it had another layer to it, which is that 0:03:34.040 --> 0:03:37.520 it locked in that same percentage for any future deals, 0:03:37.720 --> 0:03:40.960 so that essentially made the relationship between the student and 0:03:41.000 --> 0:03:44.080 the company like an athlete and an agent, which is 0:03:44.360 --> 0:03:45.080 another level. 0:03:45.360 --> 0:03:47.680 So tell us about the one that was pitched to 0:03:47.720 --> 0:03:48.840 basketball players. 0:03:49.560 --> 0:03:54.160 This contract was one page, very short and not really descriptive. 0:03:54.360 --> 0:03:57.320 So it didn't state who would own the student's intellectual 0:03:57.360 --> 0:04:00.880 property rights, and it didn't define, you know, what net 0:04:00.880 --> 0:04:04.200 profits would be. And so this company was going to 0:04:04.240 --> 0:04:07.920 be selling something and the students didn't know how much 0:04:07.920 --> 0:04:08.840 money they would be making. 0:04:09.080 --> 0:04:11.880 And lawyers you spoke to said, some of these contracts 0:04:11.920 --> 0:04:14.280 look like they're just pulled off the internet. 0:04:14.560 --> 0:04:17.480 Yes, that's right. And actually even some people I spoke 0:04:17.560 --> 0:04:20.719 to said that they would ask the students themselves to 0:04:20.760 --> 0:04:21.560 write the contract. 0:04:22.360 --> 0:04:26.760 Okay, that's new. Can you compare the requirements to be 0:04:26.800 --> 0:04:31.359 a so called NIL agent with the requirements to be 0:04:31.400 --> 0:04:34.719 a professional football agent in the NFL. 0:04:35.279 --> 0:04:38.240 The agents for these professional football players they have to 0:04:38.320 --> 0:04:41.839 register with the Players Association, they have to pass a 0:04:41.920 --> 0:04:45.640 legal test, and probably the most interesting to me, or 0:04:45.680 --> 0:04:47.480 for this story at least, is that they have to 0:04:47.880 --> 0:04:50.640 put a cap on their commission at three percent, and 0:04:50.800 --> 0:04:54.919 IL agents don't have that commission cap at all. It 0:04:55.040 --> 0:04:58.440 differs state to state based on state laws. But in 0:04:58.480 --> 0:05:01.880 many cases, the most that an NIL or a so 0:05:02.000 --> 0:05:05.360 called NIL agent has to do is just pay a 0:05:05.400 --> 0:05:07.599 fee to the state, pay an application. 0:05:07.680 --> 0:05:11.520 See so we hear about the big figure contracts, you know, 0:05:11.720 --> 0:05:18.200 six figures. Are most of the students getting much smaller deals? 0:05:18.920 --> 0:05:21.679 Yeah, I mean, these six figure deals get the most 0:05:21.760 --> 0:05:25.800 news coverage, but it is not the best representation of reality. 0:05:26.200 --> 0:05:28.719 Most students are making deals in the hundreds of dollars, 0:05:28.760 --> 0:05:31.240 maybe the thousands of dollars. But you have to think 0:05:31.240 --> 0:05:36.440 about it. There's five hundred thousand college athletes in the NCUBLEA, 0:05:36.760 --> 0:05:39.599 and we're really really just getting that top one percent 0:05:39.680 --> 0:05:40.800 in most news stories. 0:05:41.400 --> 0:05:46.000 Is there anyone on campus that students can go to 0:05:46.640 --> 0:05:49.040 for advice when they get these offers. 0:05:49.880 --> 0:05:54.320 One of the struggles that some athletes told me about 0:05:54.600 --> 0:05:59.000 is that the athletics departments are not allowed to provide 0:05:59.080 --> 0:06:03.520 legal advice to the students. That's actually something the NCUBA says, 0:06:03.600 --> 0:06:07.640 is that universities cannot provide legal advice to students. However, 0:06:07.720 --> 0:06:10.719 some schools have found, you know, sort of workarounds to 0:06:10.760 --> 0:06:14.000 this where their law schools, which are not under the 0:06:14.120 --> 0:06:18.039 nc double A, they offer pro bono legal clinics, so 0:06:18.120 --> 0:06:20.080 students can go to them with their questions and their 0:06:20.080 --> 0:06:23.039 concerns about their NIL deals. But again, you know, not 0:06:23.200 --> 0:06:26.880 every university has a law school. Not every student knows 0:06:27.000 --> 0:06:30.080 to go to these pro bono clinics, so for the 0:06:30.120 --> 0:06:32.760 most part, they're on their own, or they're working with 0:06:32.960 --> 0:06:35.360 you know, their parents, or if they can afford it 0:06:35.400 --> 0:06:37.520 and it makes sense for their deals, they're working with 0:06:37.720 --> 0:06:39.719 a lawyer outside of the university. 0:06:39.800 --> 0:06:44.400 Is there anyone on campus that students can go to 0:06:45.040 --> 0:06:47.440 for advice when they get these offers. 0:06:48.000 --> 0:06:52.000 One of the struggles that some athletes told me about 0:06:52.279 --> 0:06:56.359 is that the athletics departments are not allowed to provide 0:06:56.480 --> 0:06:59.599 legal advice to the students. That's actually something the nc 0:06:59.680 --> 0:07:03.240 DOUBLE says. However, some schools have found, you know, sort 0:07:03.240 --> 0:07:06.280 of workarounds to this, where there are law schools which 0:07:06.279 --> 0:07:11.120 are not under the NCUBA, they offer pro bono legal clinics, 0:07:11.320 --> 0:07:13.200 so students can go to them with their questions and 0:07:13.240 --> 0:07:15.600 their concerns about their NIL deals. But you know, not 0:07:15.760 --> 0:07:19.200 every university has a law school. Not every student knows 0:07:19.320 --> 0:07:21.960 to go to these pro bono clinics, so for the 0:07:21.960 --> 0:07:24.480 most part, they're on their own or they're working with 0:07:24.560 --> 0:07:26.680 their parents or if they can afford it and it 0:07:26.720 --> 0:07:29.240 makes sense for their deals, they're working with a lawyer 0:07:29.240 --> 0:07:30.440 outside of the university. 0:07:30.760 --> 0:07:35.320 You talked to an athletics compliance officer at Virginia Commonwealth University. 0:07:35.560 --> 0:07:37.760 Tell us what she is concerned about. 0:07:38.520 --> 0:07:43.320 Well, she is actually, you know, a licensed attorney, and 0:07:43.520 --> 0:07:47.760 so when she hears about or reads the contract that 0:07:47.880 --> 0:07:50.880 students has signed, she can pretty quickly pick up on 0:07:51.280 --> 0:07:54.280 red flags. And unfortunately, she told me that she's not 0:07:54.480 --> 0:07:58.760 allowed to provide legal advice to students about those contracts. 0:07:58.880 --> 0:08:01.360 And she said to me that she thinks sometimes that 0:08:01.760 --> 0:08:04.200 you know, acting in this conservative manner is you know, 0:08:04.320 --> 0:08:06.720 not helping the students to the best of her ability. 0:08:07.040 --> 0:08:09.200 But unfortunately that's what she has to do to be 0:08:09.240 --> 0:08:11.320 in compliance with nc double A policies. 0:08:11.680 --> 0:08:14.160 I guess you can understand that the NCUBA doesn't want 0:08:14.200 --> 0:08:18.480 to open itself for its people up to lawsuits over 0:08:18.840 --> 0:08:20.280 you know, the advice that they give. 0:08:20.920 --> 0:08:24.480 So I spoke to Tim Buckley, who is the senior 0:08:24.560 --> 0:08:27.920 vice president of External Affairs at the nc double A, 0:08:28.320 --> 0:08:32.800 and he emphasized that the organization is a member based organization, 0:08:33.440 --> 0:08:37.480 which means that some universities act as representatives for the 0:08:37.520 --> 0:08:41.880 rest of the membership of the organization, and that these 0:08:41.880 --> 0:08:44.640 are the ones who are making the policies and making 0:08:44.679 --> 0:08:48.000 the bylaws. And so a lawyer that I to said, 0:08:48.760 --> 0:08:52.880 these universities they have a reason for wanting to prevent 0:08:53.080 --> 0:08:56.280 their staff from providing legal advice, which is, like you said, 0:08:56.320 --> 0:08:59.760 it would open them up to liability. Imagine a student 0:09:00.160 --> 0:09:04.640 asking for advice, getting bad advice and then suing the university. 0:09:04.960 --> 0:09:06.679 So it really would open them up to a lot 0:09:06.720 --> 0:09:08.320 of potential lawsuits. 0:09:08.640 --> 0:09:10.720 Is the NCUBA doing anything about this? 0:09:11.679 --> 0:09:15.920 So Tim Buckley, the vice president of External Affairs at NCAA, 0:09:16.320 --> 0:09:19.600 said that there is working group right now working on 0:09:19.760 --> 0:09:24.120 updating the bylaws and the policies related to NIL and 0:09:24.160 --> 0:09:29.000 they're also pushing Congress to come up with a federal solutions. 0:09:29.520 --> 0:09:34.840 The NCAA can't govern every single entity involved in this space. 0:09:34.920 --> 0:09:38.800 They can only really govern the schools and the athletes, 0:09:38.960 --> 0:09:41.840 and so a federal law could help fill in some 0:09:41.920 --> 0:09:44.000 of those gaps. You know, who's going to govern the 0:09:44.080 --> 0:09:47.120 agents and who's going to govern all those other bodies 0:09:47.160 --> 0:09:48.560 that are involved in these deals. 0:09:49.160 --> 0:09:54.040 So some states prohibit students from signing anil agreements that 0:09:54.120 --> 0:09:58.440 outlast their college careers, which sounds very smart. How many 0:09:58.440 --> 0:10:01.400 states have something like that in I'm not. 0:10:01.360 --> 0:10:05.480 Sure I have an exact number, although Texas is a 0:10:05.480 --> 0:10:08.559 big one that does that. But you know, some people 0:10:09.080 --> 0:10:12.520 in the space say the more restrictive laws, as the 0:10:12.520 --> 0:10:15.520 word says, they restrict what students are allowed to do, 0:10:15.600 --> 0:10:17.960 so they're not in favor of that. Other people say 0:10:18.000 --> 0:10:20.679 that these restrictions are important to protect them. So it's 0:10:20.760 --> 0:10:23.360 kind of this debate and it's still up in the air. 0:10:23.880 --> 0:10:27.320 You spoke to former University of New Mexico track star 0:10:27.800 --> 0:10:32.080 Kendall Spencer, and I thought what he said was really intuitive, 0:10:32.240 --> 0:10:35.600 and he compared this to the concussion cases. 0:10:36.280 --> 0:10:40.480 That's right. When I first started investigating this, I had 0:10:40.480 --> 0:10:43.360 a really hard time actually finding athletes who would speak 0:10:43.400 --> 0:10:46.680 to me. And Kendall Spencer said, a lot of these 0:10:46.720 --> 0:10:49.280 students aren't going to come forward until a few years 0:10:49.320 --> 0:10:53.400 down the line, until you know, after they've graduated college, 0:10:54.280 --> 0:10:57.199 for example, they're no longer obligated to the provisions in 0:10:57.240 --> 0:11:00.559 their contract, and when they finally Sue said that we're 0:11:00.559 --> 0:11:03.200 going to start seeing lawsuits, you know, maybe five or 0:11:03.240 --> 0:11:05.720 ten years from now, and so that's really similar to 0:11:05.800 --> 0:11:08.920 the concussion than when you know, that became really prevalent 0:11:09.040 --> 0:11:10.559 only years after No. 0:11:10.679 --> 0:11:13.600 We're talking about the problems, But how how has this 0:11:14.320 --> 0:11:19.600 changed the lives of college athletes? Is there a demonstrable change? 0:11:20.400 --> 0:11:23.600 I mean, NIL has really been wonderful for a lot 0:11:23.880 --> 0:11:28.160 of college athletes, because you know, college athletes, they spend 0:11:29.080 --> 0:11:31.120 a crazy amount of their time, you know, in the 0:11:31.160 --> 0:11:34.000 gym or on the field or on the court. And 0:11:34.480 --> 0:11:39.160 before NIL was permitted, they weren't allowed to make any 0:11:39.240 --> 0:11:41.360 money off of the thing they spent most of their 0:11:41.400 --> 0:11:44.560 lives doing. And so now that that's opened up for them, 0:11:45.440 --> 0:11:47.840 you know, they can host training camps and make some 0:11:48.000 --> 0:11:51.360 pocket money off of that. They can endorse brands on 0:11:51.440 --> 0:11:54.719 social media and make some money off of that. And 0:11:55.000 --> 0:11:57.880 you know, when you're in college having you know, five 0:11:57.960 --> 0:12:01.040 hundred dollars in the bank out of bad thing at all. 0:12:01.120 --> 0:12:05.000 So it's definitely been really wonderful for a lot of athletes. 0:12:05.040 --> 0:12:07.680 And the story in no ways is trying to say 0:12:07.679 --> 0:12:08.360 the opposite of that. 0:12:08.720 --> 0:12:11.880 And also tell us about how it's you know, increased 0:12:12.120 --> 0:12:15.199 recognition of some sports and female athletes. 0:12:15.640 --> 0:12:18.439 Absolutely, I mean some of the biggest NIL stars are 0:12:18.840 --> 0:12:22.120 female athletes. It's really put them into the spotlight. It's 0:12:22.160 --> 0:12:25.640 also put some non revenue generating sports in the spotlight. 0:12:25.880 --> 0:12:28.000 And what I mean by that is, you know sports 0:12:28.040 --> 0:12:30.760 that are are not like basketball or football, you know 0:12:30.880 --> 0:12:34.080 gymnastics or wrestling for example. You know, those sports have 0:12:34.200 --> 0:12:38.040 really been elevated because these athletes have become so popular 0:12:38.080 --> 0:12:39.559 on social media. 0:12:39.679 --> 0:12:43.079 After working on this story for so long, do you 0:12:43.080 --> 0:12:45.560 think we're going to hear more about the NIL problems 0:12:45.600 --> 0:12:48.960 related to the students as time goes on, or that 0:12:49.000 --> 0:12:51.600 they'll catch on and you know they'll learn more by 0:12:51.600 --> 0:12:52.280 what they're hearing. 0:12:52.720 --> 0:12:56.040 I definitely think sort of both of what you said. 0:12:56.080 --> 0:13:00.240 I think we will continue to hear, unfortunately, stories of 0:13:00.400 --> 0:13:05.720 student athletes being exploited in these NIL deals, But states 0:13:05.760 --> 0:13:09.319 and also the federal government are very in tune to 0:13:09.400 --> 0:13:12.560 these issues, so I think reforms are coming. 0:13:13.160 --> 0:13:13.320 You know. 0:13:13.360 --> 0:13:17.040 The only thing I'll add is that universities, although they 0:13:17.080 --> 0:13:19.839 can't provide legal advice to the student athletes, a lot 0:13:19.840 --> 0:13:23.160 of them have been working really hard to provide educational 0:13:23.200 --> 0:13:28.280 courses to the students, like financial literacy and life skills workshop, 0:13:28.760 --> 0:13:31.520 you know, to educate them on what types of contracts 0:13:31.559 --> 0:13:34.360 you should and shouldn't sign. So, although you know they're 0:13:34.360 --> 0:13:37.120 not acting as lawyers, they are educating them and I 0:13:37.160 --> 0:13:39.240 think that that is an important piece of the puzzle 0:13:39.280 --> 0:13:39.680 as well. 0:13:40.000 --> 0:13:43.559 A great story, Nicole, and really well researched. Thanks so 0:13:43.640 --> 0:13:47.679 much for joining us. That's Bloomberg Law reporter Nicole Sonic. 0:13:49.080 --> 0:13:52.559 This is now the third time this office has charged 0:13:52.600 --> 0:13:57.000 Weinstein with a large scale scheme to rip off investors. 0:13:57.679 --> 0:14:01.120 Ellie Weinstein was serving a twenty four year sentence for 0:14:01.200 --> 0:14:04.920 a two hundred million dollar real estate Ponzi scheme when 0:14:04.960 --> 0:14:08.600 Donald Trump commuted his sentence in the final hours of 0:14:08.640 --> 0:14:12.360 his presidency in January of twenty twenty one. But it 0:14:12.400 --> 0:14:15.960 didn't take Weinstein long after his release from prison to 0:14:16.040 --> 0:14:19.920 begin another scam, according to the US Attorney for New Jersey, 0:14:19.960 --> 0:14:24.400 Philip Sellinger, who says Weinstein was still on supervised release 0:14:24.720 --> 0:14:29.560 when he defrauded investors by making false promises involving humanitarian 0:14:29.640 --> 0:14:33.280 supplies destined for Ukraine, another Ponzi scheme. 0:14:33.960 --> 0:14:39.520 Five defendants, including defendant Eleanu Weinstein, have been charged in 0:14:39.560 --> 0:14:43.479 the District of New Jersey by criminal Complaint with conspiring 0:14:43.560 --> 0:14:47.280 to defraud investors out of tens of millions of dollars 0:14:47.720 --> 0:14:50.760 and conspiracy to obstruct the justice. 0:14:50.840 --> 0:14:53.920 Weinstein is now back in jail after bail was denied, 0:14:53.960 --> 0:14:56.960 and he's charged along with four other men, of defrauding 0:14:56.960 --> 0:14:59.720 more than one hundred and fifty investors out of thirty 0:14:59.720 --> 0:15:03.800 five million dollars by falsely promising to invest their money 0:15:03.800 --> 0:15:08.200 in COVID nineteen masks, scarce baby formula, and first aid 0:15:08.280 --> 0:15:11.800 kits bound for Ukraine. Joining me is Bloomberg Legal reporter 0:15:11.960 --> 0:15:15.360 David Voriakis so tell us about the first scheme. 0:15:16.080 --> 0:15:19.880 Ellie Weinstein was convicted in federal court in New Jersey 0:15:19.880 --> 0:15:23.960 a decade ago for a real estate ponzi scheme that 0:15:24.120 --> 0:15:30.000 primarily preyed on Orthodox Jews in the Lakewood, New Jersey area. 0:15:30.720 --> 0:15:37.160 He pleaded guilty eventually and admitted that he stole about 0:15:37.160 --> 0:15:42.120 two hundred million dollars from his victims. While he was 0:15:42.160 --> 0:15:45.720 out on bail on that case, he was also arrested 0:15:45.760 --> 0:15:51.800 in a separate scheme that involved investing in pre IPO 0:15:52.000 --> 0:15:55.280 shares of Facebook, which turned out to be phony. 0:15:55.920 --> 0:15:59.840 Trump commuted his sentence on the last days of his presidency, 0:16:00.160 --> 0:16:02.640 and there was a campaign for his release and a 0:16:02.640 --> 0:16:05.760 lot of the people were from the Orthodox Jewish community, 0:16:05.840 --> 0:16:08.000 which is the community that he stole from. 0:16:08.520 --> 0:16:13.080 That's correct. He got a group of supporters, including some 0:16:13.160 --> 0:16:17.440 of his victims, a group of congressmen, Harvard Law School 0:16:17.480 --> 0:16:23.240 professor Alan Dershowitz, a couple of former US attorneys, and 0:16:23.400 --> 0:16:27.520 other supporters to campaign for his release. The White House 0:16:28.280 --> 0:16:32.320 announced on Trump's last day in office that he was 0:16:32.360 --> 0:16:36.160 among those who were getting commutations. They put out a 0:16:36.200 --> 0:16:39.240 release citing that he was the father of seven children 0:16:39.320 --> 0:16:42.680 and a loving husband, and that he had maintained an 0:16:42.720 --> 0:16:47.240 exemplary prison history, and that he would have the strong 0:16:47.320 --> 0:16:51.360 support from his community and members of his faith. He 0:16:51.400 --> 0:16:53.680 served nearly eight years in prison when. 0:16:53.520 --> 0:16:57.480 He was released, So now tell us about the scheme 0:16:57.560 --> 0:17:01.800 that he's accused of now when it allegedly started. 0:17:02.080 --> 0:17:07.600 Prosecutors say that his latest crimes began not long after 0:17:07.680 --> 0:17:12.760 he got out of prison. He used several other conspirators 0:17:13.240 --> 0:17:19.880 to convince people to invest in COVID nineteen mass scarce 0:17:20.160 --> 0:17:24.360 baby formula, and first aid kits bound for Ukraine. They 0:17:24.400 --> 0:17:26.760 say that this time around, there were one hundred investors 0:17:26.840 --> 0:17:30.479 who put up thirty five million dollars. I believe they 0:17:30.520 --> 0:17:35.040 were friends and family of Weinstein and the other conspirators 0:17:35.240 --> 0:17:40.280 in the case, and the government cracked the case, as 0:17:40.320 --> 0:17:45.320 I understand it, because a couple of the conspirators who 0:17:45.359 --> 0:17:49.399 were not charged with crimes secretly recorded him, and he 0:17:49.480 --> 0:17:55.240 made a number of admissions on those tapes, including he 0:17:55.400 --> 0:17:59.639 said I finagled and ponzied and lied to people to 0:17:59.720 --> 0:18:03.720 cover and he told one conspirator that he hit his 0:18:03.840 --> 0:18:08.320 true identity behind the alias of Mike Koenig because he said, 0:18:08.400 --> 0:18:10.280 no one would ever give you a penny if they 0:18:10.359 --> 0:18:13.520 knew who I was, because I have a bad reputation. 0:18:14.200 --> 0:18:18.000 So the US attorney said that these were brazen and 0:18:18.080 --> 0:18:22.080 sophisticated crimes that involved multiple conspirators and drew right from 0:18:22.119 --> 0:18:26.160 Weinstein's playbook of fraud. So was it the same kind 0:18:26.200 --> 0:18:28.679 of things he was doing as he was convicted of 0:18:28.760 --> 0:18:30.200 and a Ponzi scheme too. 0:18:30.600 --> 0:18:34.000 That's what they've alleged that he used an alias and 0:18:34.240 --> 0:18:37.960 he hid behind other people because he didn't want the 0:18:38.040 --> 0:18:42.040 world to know that he was committing these kinds of crimes. Again, 0:18:43.320 --> 0:18:48.080 he convinced people to put up money, and then he 0:18:48.200 --> 0:18:51.520 used the money from later investors to pay earlier investors. 0:18:52.240 --> 0:18:55.720 So allegedly repeating the sins of the past. And what 0:18:55.800 --> 0:18:58.080 about the money he was supposed to pay in restitution. 0:18:59.040 --> 0:19:03.600 He had a restitution order totaling about two hundred and 0:19:03.640 --> 0:19:08.520 thirty million dollars and he had only paid a little 0:19:08.520 --> 0:19:11.400 more than a million dollars of that. He also has 0:19:11.440 --> 0:19:14.920 a series of civil judgments that are not covered by 0:19:14.960 --> 0:19:16.680 his criminal restitution order. 0:19:17.520 --> 0:19:21.240 You mentioned that there were secret recordings in which Weinstein 0:19:21.520 --> 0:19:26.399 made admissions. Does that mean that the FBI has flipped 0:19:26.600 --> 0:19:28.000 one or more people. 0:19:28.640 --> 0:19:32.959 There's clearly people around Weinstein who are cooperating with the 0:19:33.040 --> 0:19:34.600 FBI in this investigation. 0:19:35.440 --> 0:19:39.240 One of the people you talked to said that Weinstein's 0:19:39.280 --> 0:19:41.080 conduct is unique. 0:19:41.560 --> 0:19:45.760 Well, the special Agent in charge of the New Jersey 0:19:45.840 --> 0:19:49.640 office said, it's a very rare day that we announced 0:19:49.760 --> 0:19:53.360 we've arrested a man who's already been arrested, convicted, sentenced 0:19:53.359 --> 0:19:56.280 to prison, and then received a presidential commutation. 0:19:57.000 --> 0:20:00.960 I take it it's the commutation part that makes this different, 0:20:00.960 --> 0:20:04.880 because people come in and out of prison unfortunately all 0:20:04.920 --> 0:20:05.399 the time. 0:20:06.200 --> 0:20:09.720 Right because presumably when his sentence was commuted, this was 0:20:09.760 --> 0:20:11.880 on the promise that he would never do this kind 0:20:11.960 --> 0:20:13.480 of criminal activity again. 0:20:14.359 --> 0:20:17.880 And according to these new allegations. He started this new 0:20:17.960 --> 0:20:22.399 scheme shortly after he was released. So prosecutors have charged 0:20:22.480 --> 0:20:26.480 him and the four others with wire fraud, conspiracy, and 0:20:26.600 --> 0:20:30.960 conspiracy to obstruct justice, and the Securities and Exchange Commission 0:20:30.960 --> 0:20:32.400 has also filed a lawsuit. 0:20:33.040 --> 0:20:38.719 Right they sued essentially the same cast of characters, saying 0:20:38.800 --> 0:20:45.560 that he committed securities fraud. Presumably that civil regulatory action 0:20:45.640 --> 0:20:49.840 would take a back seat to the criminal prosecution while 0:20:49.880 --> 0:20:50.639 it's ongoing. 0:20:51.359 --> 0:20:55.959 And tell us how the SEC's enforcement director knows Weinstein. 0:20:56.680 --> 0:21:01.760 Gavier Greywall worked on the first Einstein prosecution. He was 0:21:01.800 --> 0:21:08.159 one of three prosecutors, and so he knows Weinstein quite well. 0:21:08.440 --> 0:21:12.080 He knows the facts of his criminal history well. 0:21:12.920 --> 0:21:15.760 And tell us what happened as far as bail. 0:21:16.280 --> 0:21:19.920 Weinstein made an initial appearance in federal court in Trenton 0:21:20.080 --> 0:21:24.800 last week and he was denied bail. He's being held 0:21:25.600 --> 0:21:29.760 without bail until his lawyers can make a bail package, 0:21:29.760 --> 0:21:33.119 and then it's up to a judge to determine whether 0:21:34.320 --> 0:21:38.280 the conditions of bail are adequate to ensure his future appearance. 0:21:39.000 --> 0:21:42.960 Did Weinstein go to trial for the first Ponzi scheme? 0:21:43.920 --> 0:21:49.000 He pleaded guilty. There was extensive pre trial motions, but 0:21:49.359 --> 0:21:52.080 he ended up not going before a jury. 0:21:53.200 --> 0:21:56.120 And does this look like it might be a similar 0:21:56.160 --> 0:21:59.520 situation with the amount of evidence they have already against him, 0:22:00.080 --> 0:22:04.120 secretly recorded tapes and perhaps a witness who flipped. 0:22:04.400 --> 0:22:07.159 Well, like any criminal defendant, he has the right to 0:22:07.160 --> 0:22:13.040 go to trial and confront his accusers. That's his constitutional right. 0:22:13.600 --> 0:22:16.280 He may decide that he's going to attack the evidence 0:22:16.520 --> 0:22:23.360 and attack the underlying recordings. We'll just have to see 0:22:23.400 --> 0:22:25.120 how it plays out and. 0:22:25.119 --> 0:22:27.200 How much time is Weinstein facing here. 0:22:27.560 --> 0:22:31.280 Weinstein faces twenty years in prison on the most serious count, 0:22:31.320 --> 0:22:36.159 but prosecutors have said that the investigation is ongoing, so 0:22:36.200 --> 0:22:40.399 there could be additional charges coming. He's been arrested on 0:22:40.480 --> 0:22:43.720 an FBI complaint and they may go to a grand 0:22:43.800 --> 0:22:45.639 jury and try to get an indictment. 0:22:46.040 --> 0:22:48.639 I know you'll continue to follow this case. Thanks so 0:22:48.720 --> 0:22:51.240 much for being on the show, David. That's Bloomberg Legal 0:22:51.240 --> 0:22:54.240 reporter David Voriakis, and that's it for this edition of 0:22:54.280 --> 0:22:56.920 The Bloomberg Law Show. Remember you can always get the 0:22:57.000 --> 0:23:00.280 latest legal news on our Bloomberg Law podcast. You can 0:23:00.280 --> 0:23:04.480 find them on Apple Podcasts, Spotify, and at www dot 0:23:04.480 --> 0:23:08.679 bloomberg dot com, slash podcast Slash Law, and remember to 0:23:08.720 --> 0:23:11.760 tune into The Bloomberg Law Show every weeknight at ten 0:23:11.840 --> 0:23:15.560 pm Wall Street Time. I'm June Grosso and you're listening 0:23:15.680 --> 0:23:16.359 to Bloomberg