1 00:00:15,276 --> 00:00:24,036 Speaker 1: Pushkin. At roughly four in the morning of November the eleventh, 2 00:00:24,036 --> 00:00:27,756 Speaker 1: twenty twenty two, Sam Bankman Freed signed the papers that 3 00:00:27,756 --> 00:00:32,916 Speaker 1: would put his cryptocurrency exchange FTX into bankruptcy. Within hours, 4 00:00:32,916 --> 00:00:34,956 Speaker 1: he was trying to walk it all back, calling the 5 00:00:35,036 --> 00:00:39,236 Speaker 1: Chapter eleven filing my single biggest fuck up, but it 6 00:00:39,276 --> 00:00:42,276 Speaker 1: was too late. Control of FTX had been handed over 7 00:00:42,316 --> 00:00:45,836 Speaker 1: to John Ray, a lawyer who specializes in sprawling and 8 00:00:45,876 --> 00:00:50,756 Speaker 1: messy bankruptcy proceedings. Here's what Ray testified to Congress less 9 00:00:50,756 --> 00:00:53,836 Speaker 1: than a month after taking control of FTX. The FTX 10 00:00:53,916 --> 00:00:57,276 Speaker 1: group's collapse appears to stem from absolute concentration of control 11 00:00:57,276 --> 00:01:01,036 Speaker 1: in the hands of a small group of grossly inexperienced, 12 00:01:01,516 --> 00:01:06,076 Speaker 1: unsophisticated individuals who failed to implement virtually any of the 13 00:01:06,156 --> 00:01:09,436 Speaker 1: systems or controls that are necessary for a company and 14 00:01:09,476 --> 00:01:13,316 Speaker 1: trusted with other people's money year assets. Raise the guy 15 00:01:13,356 --> 00:01:16,156 Speaker 1: who oversaw the liquidation of big companies such as Enron 16 00:01:16,156 --> 00:01:19,876 Speaker 1: and Nortel. The shady throws on Sam Bankman Freed is 17 00:01:19,916 --> 00:01:23,396 Speaker 1: like a cloud of ash from Mount Vesuvius. Bankruptcies can 18 00:01:23,396 --> 00:01:26,876 Speaker 1: be placed in the same legal category as divorces. They 19 00:01:26,956 --> 00:01:29,156 Speaker 1: let the world know that something has gone really wrong, 20 00:01:30,156 --> 00:01:33,156 Speaker 1: and the proceedings rarely leave anyone happy, except maybe for 21 00:01:33,196 --> 00:01:35,916 Speaker 1: the lawyers who get paid no matter what. Also, it 22 00:01:35,916 --> 00:01:38,596 Speaker 1: can be hard to figure out what actually went wrong. 23 00:01:38,956 --> 00:01:41,716 Speaker 1: Everyone has a different version of events when it comes 24 00:01:41,716 --> 00:01:45,636 Speaker 1: to the bankruptcy of FTX and bankruptcy in general. There's 25 00:01:45,636 --> 00:01:50,156 Speaker 1: a lot I need to learn, So welcome to on 26 00:01:50,356 --> 00:01:55,236 Speaker 1: background from Against the Rules. I'm Michael Lewis. I've had 27 00:01:55,236 --> 00:01:57,516 Speaker 1: a front row seat to the meltdown at FTX, and 28 00:01:57,596 --> 00:02:01,276 Speaker 1: my next book will be all about that. In this series, 29 00:02:01,316 --> 00:02:03,516 Speaker 1: I get to take you along as I interview scholars 30 00:02:03,516 --> 00:02:08,396 Speaker 1: and other journalists for background context I need. Today we're 31 00:02:08,436 --> 00:02:11,076 Speaker 1: going deep into the bankruptcy system in the United States. 32 00:02:11,796 --> 00:02:14,556 Speaker 1: How did it come about, how does it work now? 33 00:02:15,316 --> 00:02:19,276 Speaker 1: Who's harmed really when a company declares bankruptcy and who benefits? 34 00:02:20,116 --> 00:02:26,316 Speaker 1: And why are people now calling for changes to the system. 35 00:02:26,476 --> 00:02:29,356 Speaker 1: To answer these questions, I turned to David Skale. He's 36 00:02:29,396 --> 00:02:32,436 Speaker 1: a corporate law professor at the University of Pennsylvania and 37 00:02:32,516 --> 00:02:35,796 Speaker 1: an expert on bankruptcy law in the United States. The 38 00:02:35,836 --> 00:02:38,116 Speaker 1: first thing I wanted to know was why and when 39 00:02:38,436 --> 00:02:42,636 Speaker 1: did he get so interested in bankruptcy. I went to 40 00:02:42,716 --> 00:02:47,116 Speaker 1: law school, thinking about literature, never dreaming I would have 41 00:02:47,156 --> 00:02:50,756 Speaker 1: an interest in business law at all. But I've fallen 42 00:02:50,836 --> 00:02:53,556 Speaker 1: in love with it. And there were two reasons that 43 00:02:53,596 --> 00:02:56,676 Speaker 1: I fell in love with it. One was I had 44 00:02:56,716 --> 00:03:01,676 Speaker 1: never realized just how important bankruptcy is to American history. 45 00:03:02,076 --> 00:03:05,476 Speaker 1: If you look back over the nineteenth century and ask 46 00:03:05,596 --> 00:03:10,236 Speaker 1: the question, what were the most important shoes in American 47 00:03:10,316 --> 00:03:13,196 Speaker 1: life in the nineteenth century, not just for a few years, 48 00:03:13,276 --> 00:03:17,396 Speaker 1: but for the whole century. Obviously you would say slavery 49 00:03:17,476 --> 00:03:20,596 Speaker 1: was number one, but bankruptcy might have been number two. 50 00:03:20,996 --> 00:03:25,436 Speaker 1: Defend that there was a pitched battle over whether to 51 00:03:25,516 --> 00:03:30,076 Speaker 1: have a federal bankruptcy law for a century, and pretty 52 00:03:30,156 --> 00:03:34,356 Speaker 1: much every major figure in American politics came out on 53 00:03:34,356 --> 00:03:37,196 Speaker 1: one side or the other side of the pro or 54 00:03:37,556 --> 00:03:42,636 Speaker 1: anti bankruptcy divide. So, starting in the beginning, Alexander Hamilton 55 00:03:42,836 --> 00:03:47,356 Speaker 1: was the leading pro bankruptcy person. His view was, if 56 00:03:47,356 --> 00:03:50,196 Speaker 1: America was to be a commercial nation, we needed a 57 00:03:50,236 --> 00:03:53,836 Speaker 1: bankruptcy system to make sure that creditors got treated fairly 58 00:03:53,876 --> 00:04:00,076 Speaker 1: if debtors defaulted. Thomas Jefferson was vehemently anti bankruptcy. His 59 00:04:00,196 --> 00:04:05,116 Speaker 1: view was bankruptcy would just be away for Northeastern creditors 60 00:04:05,236 --> 00:04:08,556 Speaker 1: to take advantage of a bad farm year or a 61 00:04:09,236 --> 00:04:11,756 Speaker 1: blip that caused somebody to go into debt and kick 62 00:04:11,836 --> 00:04:14,716 Speaker 1: them off their farm or off off their homestead, and 63 00:04:14,796 --> 00:04:19,196 Speaker 1: so all through the nineteenth century there was this fierce 64 00:04:19,276 --> 00:04:21,796 Speaker 1: battle about whether to have a federal bankruptcy law or not, 65 00:04:21,956 --> 00:04:23,836 Speaker 1: and it wasn't until the end of this century that 66 00:04:23,836 --> 00:04:26,116 Speaker 1: we got a permanent law. Back up A second, for me, 67 00:04:26,556 --> 00:04:30,996 Speaker 1: in Jefferson's mind, what would happen in place of bankruptcy, 68 00:04:31,476 --> 00:04:35,116 Speaker 1: Like if I was effectively bankruptcy, if I was, you know, 69 00:04:35,196 --> 00:04:36,996 Speaker 1: had no money in lots of debts, what did he 70 00:04:37,076 --> 00:04:40,796 Speaker 1: think should happen? Then? Well, there were there were state procedures, 71 00:04:41,636 --> 00:04:44,956 Speaker 1: but they were quite limited, so a state procedure would 72 00:04:44,996 --> 00:04:48,956 Speaker 1: not have effect across state lines. But I think the 73 00:04:49,076 --> 00:04:52,916 Speaker 1: thinking would have been that if a debt or defaults, 74 00:04:52,956 --> 00:04:56,876 Speaker 1: it'll be a messier process. There is room to take 75 00:04:57,156 --> 00:05:02,116 Speaker 1: care of people locally, even if that's at the expense 76 00:05:02,156 --> 00:05:07,036 Speaker 1: of northeastern creditors. One of the big complaints about the 77 00:05:07,036 --> 00:05:09,956 Speaker 1: absence of a federal bankruptcy law throughout the nineteenth century 78 00:05:10,076 --> 00:05:14,916 Speaker 1: is there was a kind of home court advantage that 79 00:05:15,036 --> 00:05:17,556 Speaker 1: the debtor and people close to the debtor had and 80 00:05:17,636 --> 00:05:20,236 Speaker 1: so it'd be a little bit more likely that your 81 00:05:20,276 --> 00:05:25,796 Speaker 1: brother got repaid than a department store in the northeast. 82 00:05:26,316 --> 00:05:29,436 Speaker 1: And the and the Hamilton argument is with a bankruptcy 83 00:05:29,476 --> 00:05:32,876 Speaker 1: law in place, credit might flow actually more freely. Oh, 84 00:05:32,916 --> 00:05:35,996 Speaker 1: no question, Distant creditors would know that they were protected 85 00:05:36,036 --> 00:05:39,676 Speaker 1: by the law. That's exactly right. And there were two 86 00:05:39,836 --> 00:05:43,276 Speaker 1: kinds of concerns that creditors had. One is that they 87 00:05:43,316 --> 00:05:47,116 Speaker 1: wouldn't be protected, and that local credit creditors would be 88 00:05:47,236 --> 00:05:50,436 Speaker 1: protected more. And there were people in the legislative debates 89 00:05:50,436 --> 00:05:53,956 Speaker 1: in the nineteenth century who defended that. They said, as 90 00:05:54,036 --> 00:05:57,276 Speaker 1: a moral matter, you should repay your your brother or 91 00:05:57,316 --> 00:06:01,396 Speaker 1: your neighbor before you you repay some out of town creditors. 92 00:06:01,396 --> 00:06:05,036 Speaker 1: So there was a concern about even handedness. There also 93 00:06:05,196 --> 00:06:10,036 Speaker 1: was a concern that debtors would just abscond, that if 94 00:06:10,076 --> 00:06:13,916 Speaker 1: you're a debtor here in Pennsylvania you run into financial trouble, 95 00:06:14,436 --> 00:06:17,116 Speaker 1: that you'll go west. And in fact, if you look 96 00:06:17,156 --> 00:06:20,916 Speaker 1: at the court records in the nineteenth century, you will 97 00:06:21,036 --> 00:06:24,956 Speaker 1: sometimes see in a Northeastern state like Pennsylvania or a 98 00:06:24,956 --> 00:06:28,796 Speaker 1: Delaware on a file, you'll see the letters g T T, 99 00:06:29,516 --> 00:06:33,796 Speaker 1: which stands for Gone to Texas. And one of the 100 00:06:33,876 --> 00:06:37,796 Speaker 1: virtues of a federal bankruptcy law is it can reach 101 00:06:37,876 --> 00:06:43,156 Speaker 1: people nationwide, so it's not people cannot escape by moving 102 00:06:43,156 --> 00:06:46,076 Speaker 1: to another state. So creditors wanted there to be a 103 00:06:46,076 --> 00:06:50,356 Speaker 1: fair distribution of the debtor's assets. They wanted to limit 104 00:06:50,916 --> 00:06:54,756 Speaker 1: debtor's abilities to abscond when they defaulted, and they thought 105 00:06:54,796 --> 00:06:57,076 Speaker 1: a bankruptcy system was the way to do it. So 106 00:06:57,196 --> 00:07:00,276 Speaker 1: you become enamored of bankruptcy law because you see bankruptcy 107 00:07:00,316 --> 00:07:02,396 Speaker 1: laws sits right in the middle of American history. That 108 00:07:02,596 --> 00:07:05,476 Speaker 1: was the first reason. And then the other reason I 109 00:07:05,516 --> 00:07:10,716 Speaker 1: became enamored of it is it's about meat individuals and 110 00:07:10,836 --> 00:07:15,276 Speaker 1: institutions in a period of distress, and if this system 111 00:07:15,396 --> 00:07:17,956 Speaker 1: works well, they can end up in a better place. 112 00:07:18,156 --> 00:07:21,796 Speaker 1: And I found that cool forty years ago, thirty five 113 00:07:21,876 --> 00:07:25,156 Speaker 1: years ago. I still find it cool today. It's about 114 00:07:25,396 --> 00:07:30,676 Speaker 1: people whose lives and institutions better in a shambles and 115 00:07:31,716 --> 00:07:34,676 Speaker 1: trying to put them in a better place. And I've 116 00:07:34,676 --> 00:07:37,396 Speaker 1: got a big defender of the American bankruptcy system. Maybe 117 00:07:37,436 --> 00:07:39,636 Speaker 1: too much of a defender, but I really think it's 118 00:07:39,676 --> 00:07:45,316 Speaker 1: a great system. So theres a controversy argument through the 119 00:07:45,396 --> 00:07:50,036 Speaker 1: thirties that leads to changes in the bankruptcy laws. They 120 00:07:50,116 --> 00:07:52,796 Speaker 1: kind of echo something that I'm dealing with now, and 121 00:07:52,796 --> 00:07:54,236 Speaker 1: I want you to talk about that a little bit, 122 00:07:54,876 --> 00:07:57,356 Speaker 1: like what are the tensions that build up in the 123 00:07:57,396 --> 00:08:02,036 Speaker 1: system that lead to it having to change. What really 124 00:08:02,316 --> 00:08:06,996 Speaker 1: drove the populist side of the nineteen thirties was the 125 00:08:07,116 --> 00:08:10,836 Speaker 1: large scale corporate side of things, the big corporations, and 126 00:08:10,876 --> 00:08:14,396 Speaker 1: so that was evolving on a separate track. So I've 127 00:08:14,436 --> 00:08:18,836 Speaker 1: been talking about the federal bankruptcy law didn't or wasn't 128 00:08:18,916 --> 00:08:23,916 Speaker 1: used by large corporations. With large corporations, the way things 129 00:08:23,956 --> 00:08:29,036 Speaker 1: evolved was the first large corporations were railroads. Railroads were 130 00:08:29,076 --> 00:08:32,476 Speaker 1: privately run in this country, as you know, unlike in 131 00:08:32,796 --> 00:08:37,756 Speaker 1: many countries. There was a gold rush to control important 132 00:08:37,836 --> 00:08:41,796 Speaker 1: railroad lines, a lot of mergers and cobbling things together, 133 00:08:41,916 --> 00:08:44,396 Speaker 1: sort of like the telecom boom of the early two 134 00:08:44,436 --> 00:08:48,676 Speaker 1: thousands and before then. And whenever we had an economic crisis, 135 00:08:48,716 --> 00:08:52,076 Speaker 1: a lot of the railroads would fail. And when they failed, 136 00:08:52,276 --> 00:08:57,676 Speaker 1: it created a very odd dilemma, which is everybody thought 137 00:08:57,716 --> 00:09:00,716 Speaker 1: that we needed the railroads. They needed to be reorganized. 138 00:09:00,756 --> 00:09:02,916 Speaker 1: They needed to be kept in place on the one hand, 139 00:09:03,876 --> 00:09:06,316 Speaker 1: but it wasn't clear that there was a legal basis 140 00:09:06,356 --> 00:09:09,156 Speaker 1: for doing that. It wasn't clear Congress could step in 141 00:09:09,356 --> 00:09:14,196 Speaker 1: and put a railroad reorganization statute in place. And the 142 00:09:14,236 --> 00:09:17,916 Speaker 1: reason for this was there was bankruptcy clause in the Constitution, 143 00:09:18,036 --> 00:09:20,596 Speaker 1: but in the nineteenth century a lot of people didn't 144 00:09:20,596 --> 00:09:24,516 Speaker 1: think that applied to corporations. They thought corporations are governed 145 00:09:24,516 --> 00:09:27,756 Speaker 1: by the states. They're not governed by Congress. Bankruptcy clause 146 00:09:27,836 --> 00:09:31,996 Speaker 1: must not have corporations in mind. That argument eventually lost, 147 00:09:32,036 --> 00:09:34,756 Speaker 1: but it was a very serious argument for a long time. 148 00:09:35,516 --> 00:09:38,916 Speaker 1: What ended up happening was Wall Street lawyers and Wall 149 00:09:38,916 --> 00:09:46,196 Speaker 1: Street bankers cobbled up this incredibly ingenious use of ordinary 150 00:09:46,236 --> 00:09:50,596 Speaker 1: foreclosure law and turned it into a way to restructure 151 00:09:50,676 --> 00:09:54,956 Speaker 1: large corporations. And what they did was when a railroad defaulted, 152 00:09:56,076 --> 00:10:00,836 Speaker 1: some of the bondholders would ask the court to foreclose 153 00:10:01,276 --> 00:10:05,276 Speaker 1: on their bonds, which had mortgages on railroad property. They 154 00:10:05,276 --> 00:10:08,316 Speaker 1: were secured by mortgages, so the bond holders would ask 155 00:10:08,836 --> 00:10:12,036 Speaker 1: the court to start a foreclosure proceeding. But they would say, 156 00:10:12,476 --> 00:10:14,996 Speaker 1: but court don't have the sale now we'll tell you 157 00:10:15,036 --> 00:10:17,996 Speaker 1: when we're ready for the sale. And then the Wall 158 00:10:17,996 --> 00:10:23,156 Speaker 1: Street bankers would form committees of the bonds of the 159 00:10:23,196 --> 00:10:27,276 Speaker 1: stocks that they had underwritten. They would negotiate with one 160 00:10:27,276 --> 00:10:29,236 Speaker 1: another and with the debtor. They would work out the 161 00:10:29,356 --> 00:10:33,996 Speaker 1: terms of the reorganization. They would then form one big 162 00:10:34,036 --> 00:10:37,556 Speaker 1: committee called the reorganization Committee. Then they'd go back to 163 00:10:37,596 --> 00:10:39,956 Speaker 1: the court and they'd say Court, we're ready for our 164 00:10:39,996 --> 00:10:43,636 Speaker 1: foreclosure sale now. And there would be exactly one bidder 165 00:10:43,676 --> 00:10:47,516 Speaker 1: at the foreclosure sale, which would be the reorganization committee, 166 00:10:47,556 --> 00:10:50,356 Speaker 1: and it would bid all of the old stock, all 167 00:10:50,396 --> 00:10:52,876 Speaker 1: of the old bonds, plus a little bit of cash 168 00:10:52,916 --> 00:10:55,876 Speaker 1: to pay off the people who couldn't be persuaded to 169 00:10:55,876 --> 00:11:01,236 Speaker 1: go along. So it was this incredibly ingenious distortion of 170 00:11:01,356 --> 00:11:04,996 Speaker 1: ordinary foreclosure law that was turned into a reorganization framework. 171 00:11:05,436 --> 00:11:10,556 Speaker 1: So it was this kind of informal reorganized strategy which 172 00:11:10,596 --> 00:11:15,116 Speaker 1: was called railroad receivership or equity receivership, and it was 173 00:11:15,276 --> 00:11:18,756 Speaker 1: used for decades with no statute at all until the 174 00:11:18,836 --> 00:11:21,916 Speaker 1: nineteen thirties, and then it finally got codified in the 175 00:11:21,996 --> 00:11:26,476 Speaker 1: nineteen thirties. In the early nineteen thirties and about the 176 00:11:26,516 --> 00:11:29,596 Speaker 1: time it was getting codified. The New Deal reformers said, 177 00:11:29,596 --> 00:11:32,996 Speaker 1: wait a second, this is outrageous. These Wall Street banks 178 00:11:32,996 --> 00:11:36,636 Speaker 1: and lawyers are ripping everybody off. And that's what led 179 00:11:36,716 --> 00:11:40,356 Speaker 1: to the big overhaul in nineteen thirty eight. And what 180 00:11:40,436 --> 00:11:44,196 Speaker 1: happens in that they essentially destroy the Wall Street practice. 181 00:11:44,236 --> 00:11:47,876 Speaker 1: So what the nineteen thirty eight law did was called 182 00:11:47,916 --> 00:11:51,596 Speaker 1: the Chandler Act of nineteen thirty eight. Is it said, 183 00:11:51,796 --> 00:11:53,996 Speaker 1: if you are a bank or if you are a 184 00:11:54,116 --> 00:12:00,156 Speaker 1: law firm that represented the debtor before they filed for bankruptcy, 185 00:12:00,276 --> 00:12:02,636 Speaker 1: you can't have anything to do with them in bankruptcy. 186 00:12:02,756 --> 00:12:07,636 Speaker 1: Which makes the old railroad receivership process impossible because it 187 00:12:07,996 --> 00:12:12,876 Speaker 1: was based on the original bankers who'd underwritten the stock 188 00:12:12,916 --> 00:12:16,196 Speaker 1: were bonds in the Wall Street lawyers being the same 189 00:12:16,236 --> 00:12:18,716 Speaker 1: people who would work things out after default. But they 190 00:12:18,756 --> 00:12:22,476 Speaker 1: were kicked out of the process. And then finally in 191 00:12:22,676 --> 00:12:27,516 Speaker 1: nineteen seventy eight, Congress overhauled the bankruptcy laws again and 192 00:12:27,596 --> 00:12:31,796 Speaker 1: we essentially went back to the old practice where the 193 00:12:31,796 --> 00:12:34,556 Speaker 1: managers of the company are not kicked out when it 194 00:12:34,596 --> 00:12:38,036 Speaker 1: files for bankruptcy. They continue running the company. The fact 195 00:12:38,036 --> 00:12:40,476 Speaker 1: that you were a banker or a lawyer for the 196 00:12:40,516 --> 00:12:45,116 Speaker 1: company before bankruptcy does not preclude you from representing it. Interestingly, 197 00:12:45,276 --> 00:12:48,436 Speaker 1: there's a little FTX angle there. There was a bit 198 00:12:48,516 --> 00:12:51,596 Speaker 1: of a firestorm about let's let's wait on that. Let's 199 00:12:51,596 --> 00:13:02,956 Speaker 1: wait on that. We'll be right back. I'm back with 200 00:13:03,036 --> 00:13:06,836 Speaker 1: bankruptcy expert David Skale. So I want to turn you 201 00:13:07,076 --> 00:13:09,956 Speaker 1: to my purposes now. I want to talk about it now. 202 00:13:09,956 --> 00:13:11,876 Speaker 1: I want to talk about FTX, and I want to 203 00:13:11,916 --> 00:13:14,556 Speaker 1: walk you through just like some specific questions I have 204 00:13:15,236 --> 00:13:17,436 Speaker 1: as I've watched, because i've I've watched kind of watched 205 00:13:17,436 --> 00:13:19,716 Speaker 1: it unfold. I was there the day that Sam Bankman 206 00:13:19,796 --> 00:13:25,876 Speaker 1: Freed signed the bankruptcy papers, and he was He says it, 207 00:13:26,116 --> 00:13:28,756 Speaker 1: you know, he said this publicly that he's the worst 208 00:13:28,796 --> 00:13:30,316 Speaker 1: thing he ever did and he shouldn't have done it, 209 00:13:30,316 --> 00:13:33,076 Speaker 1: and he only did it because the internal council was 210 00:13:33,156 --> 00:13:34,796 Speaker 1: yelling at him. Everybody's yelling at him. He so he 211 00:13:34,796 --> 00:13:36,716 Speaker 1: signs these things at four in the morning and five 212 00:13:36,716 --> 00:13:38,636 Speaker 1: minutes later changes his mind and says he wished he 213 00:13:38,676 --> 00:13:40,476 Speaker 1: wants it back, and they say it's too late, you 214 00:13:40,516 --> 00:13:44,716 Speaker 1: can't You've already signed them. So first question is, so 215 00:13:44,756 --> 00:13:47,596 Speaker 1: you basically understand, you have a sense of what FTX 216 00:13:47,676 --> 00:13:49,276 Speaker 1: was as a business, It was a it was a 217 00:13:49,316 --> 00:13:52,756 Speaker 1: cryptocurrency exchange. They were a hundred and something different entities 218 00:13:52,796 --> 00:13:55,876 Speaker 1: that had you know, exchange in Japan and exchange in Turkey. 219 00:13:55,916 --> 00:13:57,556 Speaker 1: It had an exchange in the United States, but the 220 00:13:57,596 --> 00:14:00,996 Speaker 1: bulk of the business was in the Bahamas. And he's 221 00:14:01,036 --> 00:14:04,476 Speaker 1: in the Bahamas and most of the important employees are 222 00:14:04,476 --> 00:14:08,636 Speaker 1: in the Bahamas. What would happen if he doesn't sign it, 223 00:14:08,796 --> 00:14:12,356 Speaker 1: Like he's being asked to declare bankruptcy in the United States, 224 00:14:12,956 --> 00:14:15,636 Speaker 1: even though the vast majority of what he's doing is 225 00:14:15,676 --> 00:14:17,676 Speaker 1: outside of the United States, and the vast majority of 226 00:14:17,716 --> 00:14:20,436 Speaker 1: what he's doing is even illegal for Americans to participate in. 227 00:14:21,476 --> 00:14:26,916 Speaker 1: If he doesn't sign, what would have happened? Probably what 228 00:14:27,276 --> 00:14:33,396 Speaker 1: happens is FDx gets thrown into bankruptcy in the US, 229 00:14:33,436 --> 00:14:35,916 Speaker 1: not in the Bahamas. Well though it's there's got to 230 00:14:35,956 --> 00:14:38,596 Speaker 1: be a proceeding in the Bahamas as well. I believe 231 00:14:38,796 --> 00:14:43,876 Speaker 1: the Bahamas liquidators initiated that themselves. That's true. That's true, 232 00:14:43,956 --> 00:14:46,436 Speaker 1: So that probably why what would how would it have 233 00:14:46,476 --> 00:14:49,836 Speaker 1: gotten thrown into bankruptcy in the United States? As a 234 00:14:49,836 --> 00:14:52,996 Speaker 1: as a technical matter, it is very easy to put 235 00:14:52,996 --> 00:14:56,836 Speaker 1: a company into bankruptcy. All it takes is you have 236 00:14:56,876 --> 00:15:00,116 Speaker 1: to have three creditors that sign the petition, and they 237 00:15:00,196 --> 00:15:05,636 Speaker 1: have to have roughly nineteen thousand dollars in general obligations 238 00:15:05,716 --> 00:15:09,236 Speaker 1: general unsecured claim so you could take three customers. The 239 00:15:09,276 --> 00:15:12,396 Speaker 1: American creditors were such a trivial part of the business, 240 00:15:12,436 --> 00:15:15,396 Speaker 1: they could easily have just paid them off. Presumbly, these 241 00:15:15,436 --> 00:15:18,276 Speaker 1: would have to have been American creditors in the United States. No, 242 00:15:18,596 --> 00:15:24,116 Speaker 1: not necessarily. What they need is an American presence, and 243 00:15:24,436 --> 00:15:28,076 Speaker 1: FTX did have an American presence, so they would not 244 00:15:28,196 --> 00:15:33,116 Speaker 1: need to be American creditors. He couldn't pay off enough 245 00:15:33,156 --> 00:15:35,076 Speaker 1: people to stop it, I don't think, I mean it is. 246 00:15:35,276 --> 00:15:41,076 Speaker 1: It's a little trickier with something like FTX because they 247 00:15:41,116 --> 00:15:43,996 Speaker 1: don't have a lot of the ordinary creditors, you know, 248 00:15:44,036 --> 00:15:48,316 Speaker 1: the big bank lenders who are sophisticated working together and 249 00:15:49,316 --> 00:15:53,076 Speaker 1: would plot something like this out. I mean, there might 250 00:15:53,116 --> 00:15:56,036 Speaker 1: have been that there were not three creditors who were 251 00:15:56,036 --> 00:15:58,596 Speaker 1: ready to file a petition right away, but there would 252 00:15:58,636 --> 00:16:01,836 Speaker 1: have been a petition almost certainly filed in the US 253 00:16:01,876 --> 00:16:06,716 Speaker 1: because typically, if you have a choice, you probably want 254 00:16:06,716 --> 00:16:09,516 Speaker 1: to have a US proceeding because people like the US 255 00:16:09,596 --> 00:16:13,116 Speaker 1: bankruptcy system. He didn't have the power to control where 256 00:16:13,156 --> 00:16:17,556 Speaker 1: he went bankrupt. He could have conditioned his willingness to 257 00:16:17,676 --> 00:16:21,356 Speaker 1: sign on it being filed in a particular play, so 258 00:16:21,396 --> 00:16:24,636 Speaker 1: he would have had power in that sense within the 259 00:16:24,716 --> 00:16:28,756 Speaker 1: United States. But he couldn't have said, I'm bankrupt in 260 00:16:28,796 --> 00:16:30,916 Speaker 1: the Bahamas, and the Bahamas is going to deal with 261 00:16:31,036 --> 00:16:33,916 Speaker 1: my case, and the assets are here and everybody else. 262 00:16:34,436 --> 00:16:37,156 Speaker 1: You can screw yourself. He can say that, but the 263 00:16:37,196 --> 00:16:38,996 Speaker 1: world doesn't have to listen to him. I think there 264 00:16:39,116 --> 00:16:43,156 Speaker 1: was a concern that I've heard about that he was 265 00:16:43,316 --> 00:16:47,596 Speaker 1: moving assets away and the longer it took to get 266 00:16:47,636 --> 00:16:50,956 Speaker 1: into bankruptcy, the more risk there was that assets would 267 00:16:50,956 --> 00:16:54,316 Speaker 1: be gone by the time they got into bankruptcy. Or 268 00:16:54,396 --> 00:16:56,316 Speaker 1: so let me let me let me ask you this, then, 269 00:16:56,436 --> 00:16:59,836 Speaker 1: what are the checks on the insiders who are now 270 00:16:59,836 --> 00:17:05,156 Speaker 1: controlling the bankruptcy process from just bleeding the firm for 271 00:17:05,156 --> 00:17:08,436 Speaker 1: fees rather than getting the assets back to the owners. 272 00:17:09,556 --> 00:17:13,076 Speaker 1: Are there are a handful of checks of varying degrees 273 00:17:13,116 --> 00:17:16,756 Speaker 1: of effectiveness. So there is a watchdog. There's an entity 274 00:17:16,836 --> 00:17:21,196 Speaker 1: called the US trustee. Ah, Okay, who is that person? 275 00:17:21,276 --> 00:17:24,236 Speaker 1: Like where did that role come from and what powers 276 00:17:24,236 --> 00:17:27,436 Speaker 1: do they have. It's an arm of the Justice Department, 277 00:17:27,716 --> 00:17:32,236 Speaker 1: and they were put in places as a watchdog. They 278 00:17:32,276 --> 00:17:35,436 Speaker 1: were created in nineteen seventy eight when the when the 279 00:17:35,516 --> 00:17:39,516 Speaker 1: current bankruptcy laws went into plays kind of as a 280 00:17:39,596 --> 00:17:44,516 Speaker 1: replacement for the Securities and Exchange Commission. Before nineteen seventy eight, 281 00:17:44,556 --> 00:17:47,676 Speaker 1: the Security is an exchange Commission played a major role 282 00:17:47,836 --> 00:17:51,156 Speaker 1: in large bankruptcies. They were kind of kicked out in 283 00:17:51,276 --> 00:17:55,476 Speaker 1: nineteen seventy eight. In the US Trustee is to some 284 00:17:55,596 --> 00:18:00,436 Speaker 1: extent their replacement. So they're a government entity. They're a watchdog. 285 00:18:00,556 --> 00:18:02,916 Speaker 1: One of the things they do look at is fees 286 00:18:03,196 --> 00:18:06,996 Speaker 1: and conflicts of interest in things of that sort. One 287 00:18:07,076 --> 00:18:09,836 Speaker 1: of the problems in one of the reasons why the 288 00:18:09,916 --> 00:18:15,156 Speaker 1: US Trustees is needed is the most obvious check on 289 00:18:15,596 --> 00:18:21,596 Speaker 1: attorneys or financial advisors churning, you know, wasting money, would 290 00:18:21,596 --> 00:18:25,356 Speaker 1: be other attorneys and financial advisors, because they can see it, 291 00:18:25,436 --> 00:18:30,196 Speaker 1: they understand it. But because all of these folks are 292 00:18:30,356 --> 00:18:34,116 Speaker 1: repeat players and they're all part of the same inside 293 00:18:34,156 --> 00:18:38,156 Speaker 1: group of attorneys and financial advisors, they don't have an 294 00:18:38,196 --> 00:18:41,116 Speaker 1: incentive to be a check on each other. So it 295 00:18:41,516 --> 00:18:46,436 Speaker 1: does require somebody else. And so the US Trustee is 296 00:18:46,516 --> 00:18:48,596 Speaker 1: one check. Let me stop you in one second. There 297 00:18:48,716 --> 00:18:51,996 Speaker 1: does the Department of Justice have any recourse? They really don't. 298 00:18:52,236 --> 00:18:54,796 Speaker 1: They really don't, don't. All right, There isn't a real check. 299 00:18:54,956 --> 00:18:57,436 Speaker 1: There's a person who can kind of do journalism, and 300 00:18:57,476 --> 00:18:59,676 Speaker 1: the judge can read the journalism and decide whether he's 301 00:18:59,676 --> 00:19:01,876 Speaker 1: going to believe it or not. Those are your word's 302 00:19:01,876 --> 00:19:07,916 Speaker 1: not mine. But but there are limits to the check. 303 00:19:08,076 --> 00:19:11,076 Speaker 1: And I will, kind of consistent with what you're saying, 304 00:19:11,156 --> 00:19:16,076 Speaker 1: say that the US Trustee is often seen as a 305 00:19:16,236 --> 00:19:19,836 Speaker 1: gad fly, you know, kind of a past that that 306 00:19:19,916 --> 00:19:23,716 Speaker 1: we insiders need to have to put up with. Not always, 307 00:19:23,756 --> 00:19:26,156 Speaker 1: It really depends on who the US Trustee is. But 308 00:19:26,876 --> 00:19:30,356 Speaker 1: it's not a complete check. And the other check that's 309 00:19:30,396 --> 00:19:34,916 Speaker 1: emerged in recent years is in a lot of cases 310 00:19:35,036 --> 00:19:38,516 Speaker 1: there are fee examiners, So there is somebody who's brought 311 00:19:38,636 --> 00:19:42,076 Speaker 1: in to look at the fees and to raise questions 312 00:19:42,156 --> 00:19:46,236 Speaker 1: about the fees and to challenge the fees where they're problematic. 313 00:19:46,316 --> 00:19:48,756 Speaker 1: I don't know if there's a fee examiner and FTX. 314 00:19:48,796 --> 00:19:51,196 Speaker 1: I would think there probably will be one if there's 315 00:19:52,156 --> 00:19:55,916 Speaker 1: if there's not, but that that's another check. But you 316 00:19:55,956 --> 00:19:58,356 Speaker 1: know your follow up question will be at the end 317 00:19:58,396 --> 00:20:01,156 Speaker 1: of the day, how much of a check is this? 318 00:20:01,516 --> 00:20:03,596 Speaker 1: And you know my answer would be it's not a 319 00:20:03,676 --> 00:20:08,036 Speaker 1: huge check. You know there there is a potential issue 320 00:20:08,276 --> 00:20:12,356 Speaker 1: issue there. I I think by and large, the professionals 321 00:20:12,436 --> 00:20:16,676 Speaker 1: do a good job and they don't tend to just 322 00:20:16,796 --> 00:20:19,996 Speaker 1: drag out a case to drag it out, but there 323 00:20:20,156 --> 00:20:23,676 Speaker 1: there is opportunity to run up fees. There's there's no 324 00:20:23,796 --> 00:20:26,876 Speaker 1: denying that. What kind of person becomes a bankruptcy judge, 325 00:20:27,956 --> 00:20:31,196 Speaker 1: it's usually a bankruptcy lawyer that becomes a bankruptcy judge. 326 00:20:31,796 --> 00:20:34,276 Speaker 1: So it's someone who's pretty sympathetic to the fees that 327 00:20:34,356 --> 00:20:38,076 Speaker 1: bankruptcy lawyers get paid. It's somebody who tends to be 328 00:20:38,236 --> 00:20:41,356 Speaker 1: pretty sympathetic to the system. If I'm gonna have you 329 00:20:41,396 --> 00:20:45,476 Speaker 1: moneyball bankruptcy judges, all right, and and and figure out 330 00:20:45,476 --> 00:20:47,116 Speaker 1: who the good wines are, who the bad ones are, 331 00:20:47,516 --> 00:20:51,236 Speaker 1: what trade? What would you look for? One thing I 332 00:20:51,276 --> 00:20:55,636 Speaker 1: would look for is thick skin. Some some bankruptcy judges 333 00:20:56,556 --> 00:20:58,716 Speaker 1: take things a little bit too personally in my views, 334 00:20:58,716 --> 00:21:03,756 Speaker 1: So thick skin is a nice quality. Another good quality 335 00:21:04,236 --> 00:21:07,876 Speaker 1: is not being in a rush to pass judgment on 336 00:21:08,076 --> 00:21:13,116 Speaker 1: whatever the issue is. A lot of bankruptcy judges put 337 00:21:13,156 --> 00:21:18,076 Speaker 1: a premium on encouraging the parties to settle, you know, 338 00:21:18,316 --> 00:21:20,836 Speaker 1: I think sometimes there can be a little too much 339 00:21:20,836 --> 00:21:24,276 Speaker 1: of that. The judge is at an informational disadvantage. There's 340 00:21:24,316 --> 00:21:27,036 Speaker 1: a huge amount of information floating around, but the judge 341 00:21:27,076 --> 00:21:29,716 Speaker 1: doesn't know as much as the insiders do about what's 342 00:21:29,756 --> 00:21:32,796 Speaker 1: going on in a case, and so they really have 343 00:21:32,956 --> 00:21:36,196 Speaker 1: to have kind of a sixth sense or a nose 344 00:21:36,556 --> 00:21:41,876 Speaker 1: for problems because most of bankruptcy judge is power is 345 00:21:42,076 --> 00:21:45,676 Speaker 1: veto power or power to say no. The bankruptcy judge 346 00:21:45,716 --> 00:21:49,156 Speaker 1: doesn't make the deal. The bankruptcy judge doesn't decide what 347 00:21:49,236 --> 00:21:53,156 Speaker 1: the terms of the restructuring are. The bankruptcy judge either 348 00:21:53,196 --> 00:21:56,116 Speaker 1: approves it or doesn't approve it. So they have to 349 00:21:57,076 --> 00:22:01,916 Speaker 1: really know when to call bs essentially, and that's hard 350 00:22:02,036 --> 00:22:04,676 Speaker 1: because it's a it's a system that's run by insiders. 351 00:22:04,876 --> 00:22:11,116 Speaker 1: They're incredibly sophisticated, they're incredibly smart, and they are very 352 00:22:11,156 --> 00:22:14,916 Speaker 1: good at putting the judge in a position where the 353 00:22:14,996 --> 00:22:18,236 Speaker 1: judge feels like they don't have any choice. Companies come 354 00:22:18,316 --> 00:22:23,116 Speaker 1: to bankruptcy, they're out of cash. Their lender says, you've 355 00:22:23,116 --> 00:22:25,996 Speaker 1: got to sell the assets to this buyer right now, 356 00:22:26,276 --> 00:22:28,196 Speaker 1: or the company is going to go up in smokes. 357 00:22:28,396 --> 00:22:30,916 Speaker 1: And the judge has to make a decision do I 358 00:22:30,956 --> 00:22:33,796 Speaker 1: call their bluff or do I just say okay? And 359 00:22:34,236 --> 00:22:37,836 Speaker 1: it's really hard because if you call their bluff and 360 00:22:37,876 --> 00:22:40,356 Speaker 1: it turns out it's not just a bluff, there can 361 00:22:40,396 --> 00:22:42,836 Speaker 1: be you know, a lot of a lot of value 362 00:22:42,876 --> 00:22:45,636 Speaker 1: destroyed and a lot of lives made worse, and so 363 00:22:46,356 --> 00:22:51,996 Speaker 1: it's very tough. After a quick break, David Skeel and 364 00:22:52,036 --> 00:22:54,036 Speaker 1: I get into what may turn out to be one 365 00:22:54,036 --> 00:22:57,356 Speaker 1: of the harriest hair balls in the FTX bankruptcy proceedings, 366 00:22:57,916 --> 00:23:10,916 Speaker 1: all those generous donations that Sam Bankman Freed made the charity. 367 00:23:11,036 --> 00:23:15,556 Speaker 1: I'm back with David Skeel on background. There's one other 368 00:23:15,596 --> 00:23:17,996 Speaker 1: big subject I'm really curious about now. I'm sure it's 369 00:23:17,996 --> 00:23:19,876 Speaker 1: going to change, and I want to bother you again later, 370 00:23:19,956 --> 00:23:24,596 Speaker 1: but clawbacks so FTX is not just in bankruptcy, but 371 00:23:24,636 --> 00:23:27,156 Speaker 1: it's in bankruptcy, and the people who ran being charged 372 00:23:27,156 --> 00:23:34,556 Speaker 1: with fraud, and anybody who received money from this place, employees, 373 00:23:35,436 --> 00:23:38,596 Speaker 1: people who did sponsorship deals with them, people who receive 374 00:23:38,636 --> 00:23:42,556 Speaker 1: philanthropic dollars from them. People who got investment returns from 375 00:23:42,596 --> 00:23:45,236 Speaker 1: them are now facing the possibility they're gonna have to 376 00:23:45,236 --> 00:23:47,796 Speaker 1: give the money back into the bankruptcy. And some of 377 00:23:47,836 --> 00:23:51,276 Speaker 1: these amounts are quite astonishing. Like Sam Bankmanfrey wrote a 378 00:23:51,356 --> 00:23:53,836 Speaker 1: check for a couple of billion dollars to buy out 379 00:23:53,916 --> 00:23:57,796 Speaker 1: his rival and competitor eighteen months ago, And the question 380 00:23:57,916 --> 00:24:03,316 Speaker 1: is what right does the bankruptcy have to claw money 381 00:24:03,356 --> 00:24:06,356 Speaker 1: back that went out? Like is there a lot of 382 00:24:06,396 --> 00:24:09,956 Speaker 1: pressing it for this? Sam Bankmanfrey gave me a million 383 00:24:09,996 --> 00:24:14,156 Speaker 1: dollars a year ago or six months ago to cure cancer. 384 00:24:14,596 --> 00:24:17,596 Speaker 1: And I'm just I'm just a cancer researcher. And now 385 00:24:17,636 --> 00:24:19,076 Speaker 1: they come knock on my door and they say they 386 00:24:19,076 --> 00:24:21,996 Speaker 1: want the million dollars back. What's the likeli to I 387 00:24:22,076 --> 00:24:26,116 Speaker 1: have to give it back? It's it's really high. It's 388 00:24:26,156 --> 00:24:28,476 Speaker 1: the likely is it really? I didn't know that it 389 00:24:28,516 --> 00:24:31,076 Speaker 1: is the claws? But if I spent it on cancer research, 390 00:24:31,316 --> 00:24:34,316 Speaker 1: then you've got a problem. Assuming that we can link 391 00:24:34,356 --> 00:24:38,316 Speaker 1: it to FTX, then the clawback stuff goes into motion. 392 00:24:38,396 --> 00:24:42,596 Speaker 1: If somehow he gave money that was truly his money, 393 00:24:42,636 --> 00:24:46,196 Speaker 1: that wasn't FTX money, then he's not in bankruptcy at 394 00:24:46,196 --> 00:24:49,116 Speaker 1: this point at least, and so the clawb X wouldn't apply. 395 00:24:49,196 --> 00:24:53,476 Speaker 1: But to the extent it's commingled and it's it's FTX money, 396 00:24:54,316 --> 00:24:57,156 Speaker 1: there is a very high risk that this has to 397 00:24:57,196 --> 00:25:01,356 Speaker 1: come back, and the way it comes back is as 398 00:25:01,436 --> 00:25:06,116 Speaker 1: what's called a fraudulent conveyance. And there there are two 399 00:25:06,196 --> 00:25:10,436 Speaker 1: ways that transfer can be a of fraudulent conveyance. One 400 00:25:10,636 --> 00:25:14,276 Speaker 1: is if Sam bankman fried and FTX was was trying 401 00:25:14,316 --> 00:25:16,476 Speaker 1: to stiff creditors, you know, wanted to give it to 402 00:25:16,476 --> 00:25:20,196 Speaker 1: the cancer researcher because he just really didn't like his creditors, 403 00:25:20,236 --> 00:25:22,156 Speaker 1: thought there were a bunch of jerks. That would be 404 00:25:22,276 --> 00:25:27,116 Speaker 1: actual fraud. The other form of fraudulent conveyance is what's 405 00:25:27,116 --> 00:25:31,356 Speaker 1: called constructive fraud or constructive fraudulent conveyance, and you have 406 00:25:31,436 --> 00:25:34,796 Speaker 1: to show two things. One is that the dator FTX 407 00:25:34,876 --> 00:25:37,756 Speaker 1: was insolvent at the time or nearly insolvent at the time, 408 00:25:38,396 --> 00:25:42,116 Speaker 1: and the second is that the transfer was made for 409 00:25:42,316 --> 00:25:46,396 Speaker 1: less than reasonably equivalent value. So if you're transferring money 410 00:25:46,436 --> 00:25:49,436 Speaker 1: to a cancer research or you're not getting anything for it, 411 00:25:49,476 --> 00:25:52,236 Speaker 1: so there's there's no value being received, but if I 412 00:25:52,276 --> 00:25:54,476 Speaker 1: came in as a plumber and fixed your plumbing. That 413 00:25:54,476 --> 00:25:57,116 Speaker 1: would be different if you were paying me for some 414 00:25:57,196 --> 00:26:00,396 Speaker 1: service that I provided, right, you know, assuming that that 415 00:26:00,556 --> 00:26:05,156 Speaker 1: I paid you the dat are paid the reasonable value 416 00:26:05,156 --> 00:26:08,716 Speaker 1: for the service, not five times what the service is. What. Yes, 417 00:26:08,756 --> 00:26:10,876 Speaker 1: that would be fine. You can do new transactions. What 418 00:26:10,956 --> 00:26:14,716 Speaker 1: you can't do is sell assets for less than their 419 00:26:14,756 --> 00:26:20,516 Speaker 1: worth within two years before bankruptcy or give assets away. 420 00:26:20,556 --> 00:26:26,316 Speaker 1: And charitable contributions look like giving assets away. And what 421 00:26:26,556 --> 00:26:29,036 Speaker 1: a lot of folks seem to have done, or at 422 00:26:29,076 --> 00:26:31,916 Speaker 1: least some folks seem to have done with Sam Bankman 423 00:26:31,996 --> 00:26:35,036 Speaker 1: freed contributions has treated them like hot potatoes. You know, 424 00:26:35,076 --> 00:26:39,076 Speaker 1: when there were problems, they thought, oh my, they might 425 00:26:39,156 --> 00:26:42,156 Speaker 1: come after me, and some people, like politicians I think, 426 00:26:42,276 --> 00:26:46,876 Speaker 1: turned around and gave the money to some other charity. 427 00:26:47,076 --> 00:26:49,676 Speaker 1: But that doesn't solve their problem. It doesn't solve the 428 00:26:49,676 --> 00:26:51,516 Speaker 1: problem at all, and it makes it worse in a 429 00:26:51,516 --> 00:26:54,036 Speaker 1: way because you don't have the money and you still 430 00:26:54,076 --> 00:26:56,596 Speaker 1: have to give it back. Right, Sam bankmfree was handing 431 00:26:56,596 --> 00:26:58,756 Speaker 1: out money left and right. To believe, the most open 432 00:26:58,796 --> 00:27:02,796 Speaker 1: handed person in our hemisphere, and everybody on the receiving 433 00:27:02,876 --> 00:27:05,716 Speaker 1: end was so grateful, and they were so happy they 434 00:27:05,756 --> 00:27:08,036 Speaker 1: were getting all this money, and now they've got the 435 00:27:08,036 --> 00:27:10,516 Speaker 1: biggest headache of their lives. Oh, it's really true. And 436 00:27:11,036 --> 00:27:16,076 Speaker 1: one of the big legal ethical dilemmas of the case 437 00:27:16,156 --> 00:27:19,436 Speaker 1: I think is gonna be do you go after everybody 438 00:27:19,476 --> 00:27:21,796 Speaker 1: you know? Do you go after the little people? The 439 00:27:21,836 --> 00:27:24,836 Speaker 1: people that you know? Somebody they got twenty five thousand dollars, 440 00:27:24,636 --> 00:27:27,716 Speaker 1: that's that's a lot of money for them, but not 441 00:27:27,836 --> 00:27:31,956 Speaker 1: much money for the customers and other creditors of FTX. 442 00:27:31,996 --> 00:27:35,276 Speaker 1: They're gonna be some real difficult decisions I think about 443 00:27:35,276 --> 00:27:37,836 Speaker 1: who to go after and who not to go after. 444 00:27:37,956 --> 00:27:41,116 Speaker 1: But the norm is that you go after everybody. If 445 00:27:41,276 --> 00:27:46,516 Speaker 1: just hypothetically, if he had paid me to write his biography, 446 00:27:46,796 --> 00:27:50,116 Speaker 1: and like say, he paid me a fortune to write 447 00:27:50,156 --> 00:27:54,596 Speaker 1: his biography and I was still writing the biography, would 448 00:27:54,636 --> 00:27:57,396 Speaker 1: they come after me or would they wait to see 449 00:27:57,396 --> 00:27:59,116 Speaker 1: if the biography was worth it? I mean, they might 450 00:27:59,156 --> 00:28:01,836 Speaker 1: go after you even if if the biography is going 451 00:28:01,876 --> 00:28:04,676 Speaker 1: to make millions of dollars. I am so glad this 452 00:28:04,716 --> 00:28:08,116 Speaker 1: isn't an authorized biography. I mean, it's just what a 453 00:28:08,196 --> 00:28:12,276 Speaker 1: terrible I mean, he's he's affected precisely all the things 454 00:28:12,276 --> 00:28:15,556 Speaker 1: he cares about most because that's where the money went. 455 00:28:15,956 --> 00:28:18,356 Speaker 1: I think that's right. I mean, everybody that he was 456 00:28:18,836 --> 00:28:21,596 Speaker 1: kind of trying to help and do good things, as 457 00:28:21,636 --> 00:28:24,956 Speaker 1: you said, they now have a very big problem. He 458 00:28:25,036 --> 00:28:27,556 Speaker 1: said something earlier that was interesting to me that you 459 00:28:27,596 --> 00:28:30,116 Speaker 1: have to show not only that you didn't get value 460 00:28:30,156 --> 00:28:32,516 Speaker 1: for it or equivalent value, but you have to show 461 00:28:32,556 --> 00:28:37,156 Speaker 1: that when the money changed hands, the enterprise was insolvent. 462 00:28:37,796 --> 00:28:41,076 Speaker 1: So you need to identify the moment of insolvency. That's 463 00:28:41,116 --> 00:28:45,796 Speaker 1: the big sticking point with fraudulent conveyance actions. There are 464 00:28:45,796 --> 00:28:48,796 Speaker 1: two or three different things that you can show, each 465 00:28:48,836 --> 00:28:53,316 Speaker 1: of which is related to insolvency, and it can be 466 00:28:53,436 --> 00:28:55,236 Speaker 1: very very difficult to show. So that will be a 467 00:28:55,276 --> 00:28:57,756 Speaker 1: big issue. That's going to be that's going to be 468 00:28:57,796 --> 00:29:00,236 Speaker 1: where the arguments happen. So I have one more twist 469 00:29:00,316 --> 00:29:04,076 Speaker 1: for you on the fraudulent conveyance stuff, which I don't 470 00:29:04,076 --> 00:29:06,036 Speaker 1: think is going to change that answer. But the one 471 00:29:06,676 --> 00:29:11,316 Speaker 1: more interesting quirk of fraudulent conveyance is if you are 472 00:29:11,436 --> 00:29:14,196 Speaker 1: running a Ponzi scheme, you know, like the made Off 473 00:29:14,236 --> 00:29:19,516 Speaker 1: Ponzi scheme, there is a presumption that any money you 474 00:29:19,636 --> 00:29:25,396 Speaker 1: transferred was actual fraud. Now pretty unfathomable that a court 475 00:29:25,476 --> 00:29:28,636 Speaker 1: would conclude FTX was a Ponzi scheme. You know, it's 476 00:29:28,676 --> 00:29:31,636 Speaker 1: not a true Ponzi scheme. But if somehow they did, 477 00:29:32,436 --> 00:29:35,316 Speaker 1: all of these transfers might be actual fraud rather than 478 00:29:35,356 --> 00:29:38,116 Speaker 1: constructive frauds, so that you wouldn't even have to show 479 00:29:38,436 --> 00:29:41,836 Speaker 1: the insolvency. It won't happen, I don't think but yeah don't. Yeah, 480 00:29:41,836 --> 00:29:43,356 Speaker 1: I don't. I don't think so either, because it was 481 00:29:43,396 --> 00:29:47,516 Speaker 1: actually a legitimate, profitable business on its own. All right, 482 00:29:47,716 --> 00:29:50,756 Speaker 1: this was really interesting, David, Thank you so much. You 483 00:29:50,756 --> 00:29:52,916 Speaker 1: are quite welcome, Take care, take care of by bye. 484 00:29:55,196 --> 00:29:57,316 Speaker 1: Let's end to day by answering our question from one 485 00:29:57,316 --> 00:30:03,276 Speaker 1: of our listeners, or maybe more than one, Caleb. Caleb asks, Hi, Michael, 486 00:30:04,036 --> 00:30:06,076 Speaker 1: can you let us know what podcast you're listening to 487 00:30:06,276 --> 00:30:08,636 Speaker 1: right now and the best books you read in two 488 00:30:08,636 --> 00:30:14,356 Speaker 1: thousand twenty two? Thank you, Cale, Thanks for being so polite. 489 00:30:15,996 --> 00:30:19,436 Speaker 1: You know, I'm right now in a funny creative place. 490 00:30:19,556 --> 00:30:23,036 Speaker 1: I've just handed in a screenplay for a TV show, 491 00:30:23,076 --> 00:30:25,556 Speaker 1: a pilot for a TV show, and I've just, at 492 00:30:25,556 --> 00:30:28,836 Speaker 1: the same time I started writing a book, and I'm writing, writing, writing, 493 00:30:28,876 --> 00:30:31,636 Speaker 1: and when I really start writing, I tend not to 494 00:30:31,676 --> 00:30:35,036 Speaker 1: read or listen to anything, and it's just like I'm 495 00:30:35,076 --> 00:30:38,356 Speaker 1: bored with everything. But what I'm working on board's wrong 496 00:30:38,356 --> 00:30:41,316 Speaker 1: word that I'm annoyed by it. I don't want to 497 00:30:41,356 --> 00:30:43,956 Speaker 1: be distracted by it. So I'm not really listening to 498 00:30:43,996 --> 00:30:47,636 Speaker 1: any podcasts right now. The solve I'm gonna change your 499 00:30:47,716 --> 00:30:49,796 Speaker 1: question a little bit. What's the last podcast that just 500 00:30:49,916 --> 00:30:53,076 Speaker 1: absolutely riveted me? And I was a little late to it, 501 00:30:53,676 --> 00:30:56,596 Speaker 1: but there was a podcast called The Just Enough Family 502 00:30:58,036 --> 00:31:01,236 Speaker 1: by Ariel Levy or Levy, I don't know how you 503 00:31:01,236 --> 00:31:05,116 Speaker 1: pronounce her last name, but it's a nineteen eighties story 504 00:31:05,196 --> 00:31:09,916 Speaker 1: about Saul Steinberg, the tycoon, the takeover person, and essentially 505 00:31:09,956 --> 00:31:13,276 Speaker 1: the aftershocks of both his rise and his fall. It's 506 00:31:13,356 --> 00:31:19,636 Speaker 1: told through members of his family, and it's the most 507 00:31:19,676 --> 00:31:28,236 Speaker 1: extraordinary act of reportage because what Aeron Levy does, she 508 00:31:28,356 --> 00:31:31,436 Speaker 1: essentially gets the characters in this family to talk to 509 00:31:31,476 --> 00:31:35,076 Speaker 1: you about their experiences and about each other. You can 510 00:31:35,116 --> 00:31:38,516 Speaker 1: barely imagine them talking about themselves and each other to 511 00:31:38,556 --> 00:31:41,436 Speaker 1: their therapists. I mean, you're just like in the middle 512 00:31:41,516 --> 00:31:46,116 Speaker 1: of the mess, and you know, the whole thing about 513 00:31:46,236 --> 00:31:48,636 Speaker 1: all happy families are the same, and every unhappy family 514 00:31:48,756 --> 00:31:51,596 Speaker 1: is different in its own way. This unhappy family has 515 00:31:51,676 --> 00:31:56,636 Speaker 1: just an extraordinary way of being unhappy. And I just thought, 516 00:31:56,916 --> 00:32:02,036 Speaker 1: you know. Brava A Brava. All Right. On Background is 517 00:32:02,076 --> 00:32:05,516 Speaker 1: hosted by Me Michael Lewis and produced by Catherine Gerardo 518 00:32:05,716 --> 00:32:10,276 Speaker 1: and Lydia Jane Cotton. Our editor is Julia Martin. Our 519 00:32:10,316 --> 00:32:15,236 Speaker 1: engineer is Sarah Brugaire. Thanks to our SVP of production 520 00:32:15,436 --> 00:32:19,316 Speaker 1: Greta Cone, our show is recorded by Tofa Ruth at 521 00:32:19,316 --> 00:32:23,676 Speaker 1: Berkeley Advanced Media Studios. Our music was composed by Matthias 522 00:32:23,716 --> 00:32:28,196 Speaker 1: Bossy and John Evans a Stellwagon symphonette. My old friend 523 00:32:28,276 --> 00:32:32,156 Speaker 1: Nick Brettel composed our theme song. On Background is a 524 00:32:32,196 --> 00:32:35,916 Speaker 1: production of Pushkin Industries. Don't forget that we have a 525 00:32:35,956 --> 00:32:39,716 Speaker 1: website atr podcast dot com in case you want to 526 00:32:39,716 --> 00:32:42,356 Speaker 1: send me a question or a complaint or anything at all. 527 00:32:42,676 --> 00:32:45,316 Speaker 1: I'll read the questions, I won't read the complaints. That's 528 00:32:45,356 --> 00:32:51,276 Speaker 1: atr podcasts dot com. Define more Pushkin Podcasts. Listen on 529 00:32:51,316 --> 00:32:55,596 Speaker 1: the iHeartRadio app, Apple Podcasts, or wherever you listen to podcasts, 530 00:32:56,236 --> 00:32:58,756 Speaker 1: and if you'd like to listen, add free and learn 531 00:32:58,796 --> 00:33:02,196 Speaker 1: about other exclusive offerings. Don't forget the sign up for 532 00:33:02,236 --> 00:33:07,596 Speaker 1: a Pushkin Plus subscription at pushkin dot Fm, Backslash Plus, 533 00:33:07,796 --> 00:33:09,636 Speaker 1: or on our Apple Show pay te