1 00:00:03,200 --> 00:00:08,000 Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio. 2 00:00:10,000 --> 00:00:13,600 Speaker 2: Evanka Trump was the final witness in the civil lawsuit 3 00:00:13,680 --> 00:00:17,600 Speaker 2: that could reshape the Trump real estate empire. She has 4 00:00:17,640 --> 00:00:21,000 Speaker 2: been in her father's inner circle in both business as 5 00:00:21,000 --> 00:00:25,320 Speaker 2: an executive vice president of the family's Trump organization and 6 00:00:25,360 --> 00:00:29,000 Speaker 2: then in politics as a senior White House advisor. But 7 00:00:29,080 --> 00:00:32,080 Speaker 2: she testified that she had no role in his personal 8 00:00:32,120 --> 00:00:36,599 Speaker 2: financial statements, which New York Attorney General Letitia James claims 9 00:00:36,640 --> 00:00:41,239 Speaker 2: were fraudulently inflated and deceived banks and lenders. Joining me 10 00:00:41,280 --> 00:00:44,600 Speaker 2: is Bloomberg Legal reporter Patricia Hurtado, who's been covering the 11 00:00:44,680 --> 00:00:48,280 Speaker 2: trial and was in the courtroom for Ivanka Trump's testimony. 12 00:00:48,760 --> 00:00:51,639 Speaker 2: The first question I have is, did Ivanka throw her 13 00:00:51,640 --> 00:00:53,400 Speaker 2: father under the bus in any way? 14 00:00:54,200 --> 00:00:57,960 Speaker 3: Now, she was a very measured witness. Now she is 15 00:00:58,040 --> 00:01:01,360 Speaker 3: not a defendant anymore, but she had been at one 16 00:01:01,400 --> 00:01:05,960 Speaker 3: point until a state appeals court earlier this year dismissed 17 00:01:05,959 --> 00:01:08,880 Speaker 3: the case against her, saying the claims brought by the 18 00:01:08,959 --> 00:01:11,800 Speaker 3: state were too old because she was already out of 19 00:01:11,840 --> 00:01:15,200 Speaker 3: the business working for her father in Washington, so she 20 00:01:15,280 --> 00:01:17,640 Speaker 3: was no longer part of the Trump company. She did 21 00:01:17,640 --> 00:01:20,600 Speaker 3: not throw her father under the bus, even in the 22 00:01:20,640 --> 00:01:26,440 Speaker 3: tiniest way. She was basically a very measured, controlled witness 23 00:01:26,520 --> 00:01:30,360 Speaker 3: who did not have a very strong memory. And her 24 00:01:30,480 --> 00:01:33,600 Speaker 3: tact to me seemed to me that she would answer 25 00:01:33,720 --> 00:01:37,400 Speaker 3: questions posed to her by the New York Attorney General 26 00:01:37,880 --> 00:01:40,959 Speaker 3: saying do you remember that you signed this document or 27 00:01:40,959 --> 00:01:43,080 Speaker 3: do you remember that you were involved in this transaction, 28 00:01:43,560 --> 00:01:47,920 Speaker 3: and her answer was a basically repetitive I don't remember 29 00:01:48,000 --> 00:01:50,160 Speaker 3: it happened, but I remember you showed it to me 30 00:01:50,280 --> 00:01:53,760 Speaker 3: last year when you interviewed me. So basically the totality 31 00:01:53,800 --> 00:01:56,520 Speaker 3: of her memory was limited to I only saw this 32 00:01:56,560 --> 00:01:58,400 Speaker 3: once before when you showed it to me, but I 33 00:01:58,440 --> 00:02:02,960 Speaker 3: have absolutely no memory of the actual transaction. So there 34 00:02:03,000 --> 00:02:06,600 Speaker 3: was an interesting moment in which on direct when she's 35 00:02:06,720 --> 00:02:09,440 Speaker 3: questioned by the New York Attorney General, she was asked 36 00:02:09,480 --> 00:02:12,600 Speaker 3: about this transaction having to do with Deutsche Bank financing, 37 00:02:12,880 --> 00:02:16,800 Speaker 3: and at one point her father was thinking of getting 38 00:02:16,919 --> 00:02:21,600 Speaker 3: equity financing in the project to do a bid it's 39 00:02:21,639 --> 00:02:24,880 Speaker 3: called a request for proposal to the federal government to 40 00:02:25,040 --> 00:02:29,160 Speaker 3: redo the old post office and turn a moribund office 41 00:02:29,160 --> 00:02:34,320 Speaker 3: building into a luxury five star hotel. And in twenty eleven, 42 00:02:34,480 --> 00:02:37,840 Speaker 3: and you see documents where her dad's talking about possibly 43 00:02:37,880 --> 00:02:41,359 Speaker 3: doing a deal, and that Tom Barrick of Colony Capital, 44 00:02:41,440 --> 00:02:43,960 Speaker 3: the private equity firm, was going to be with her 45 00:02:44,000 --> 00:02:46,360 Speaker 3: father in a sort of a joint partnership where they 46 00:02:46,360 --> 00:02:49,040 Speaker 3: would do this deal and the du to redevelopment. And 47 00:02:49,160 --> 00:02:51,360 Speaker 3: she professed not to know anything about her to have 48 00:02:51,440 --> 00:02:54,560 Speaker 3: any memory. And then later on on I guess would 49 00:02:54,600 --> 00:02:58,640 Speaker 3: be called cross under friendly questioning by her father's lawyers. 50 00:02:58,720 --> 00:03:02,440 Speaker 3: She suddenly remembered all these details in great detail, and 51 00:03:02,480 --> 00:03:04,880 Speaker 3: she remembered meetings, and she remember what she said, and 52 00:03:04,919 --> 00:03:08,119 Speaker 3: she remembered meeting with the federal government, and she remembered 53 00:03:08,120 --> 00:03:11,920 Speaker 3: comparing the old post office to the Plaza Hotel. And 54 00:03:11,960 --> 00:03:14,440 Speaker 3: at one point the state lawyer turns to the judge 55 00:03:14,480 --> 00:03:18,639 Speaker 3: and said, quote, your honor, she doesn't have a present recollection. 56 00:03:19,040 --> 00:03:21,920 Speaker 3: She just spent three minutes describing the Plaza Hotel and 57 00:03:21,960 --> 00:03:25,000 Speaker 3: how it's similar to this project, you know, And yet 58 00:03:25,160 --> 00:03:28,280 Speaker 3: she basically had no memory of what I was asking her. 59 00:03:28,280 --> 00:03:30,200 Speaker 3: A few minutes ago, she was. 60 00:03:30,160 --> 00:03:34,520 Speaker 2: A point person in establishing a lending relationship with Deutsche 61 00:03:34,600 --> 00:03:37,119 Speaker 2: Bank's private wealth management arm. 62 00:03:37,640 --> 00:03:41,120 Speaker 3: So she was testifying about how did it come about 63 00:03:41,160 --> 00:03:45,720 Speaker 3: this relationship with Deutsche Bank, and she basically testifies that 64 00:03:46,080 --> 00:03:49,360 Speaker 3: her husband, her father, and the Trump Org had a 65 00:03:49,360 --> 00:03:53,000 Speaker 3: prior relationship with Deutsche Bank in the real estate section, 66 00:03:53,760 --> 00:03:58,120 Speaker 3: but that her husband, Jared Kushner, introduced her to the 67 00:03:58,280 --> 00:04:02,520 Speaker 3: Private Wealth Management Group and Deutsche Bank, which gave her 68 00:04:02,720 --> 00:04:07,760 Speaker 3: what the attorney general claims are more favorable terms based 69 00:04:07,840 --> 00:04:12,800 Speaker 3: on financial documents and statements of financial condition that were 70 00:04:12,840 --> 00:04:16,920 Speaker 3: submitted that were fraudulent. So the New York Attorney General 71 00:04:16,960 --> 00:04:19,800 Speaker 3: alleges that what the Trump or gave Deutsche Bank to 72 00:04:19,920 --> 00:04:23,800 Speaker 3: get these more favorable terms were fraudulent because they were 73 00:04:23,839 --> 00:04:26,600 Speaker 3: inflated values and inflated statements. 74 00:04:26,640 --> 00:04:31,159 Speaker 2: So she was the point person they renegotiated. But yet 75 00:04:31,200 --> 00:04:34,680 Speaker 2: she said she wasn't involved and had no knowledge of 76 00:04:34,720 --> 00:04:36,400 Speaker 2: his personal financial statements. 77 00:04:37,040 --> 00:04:40,120 Speaker 3: It was more like she said she was not involved. 78 00:04:40,200 --> 00:04:43,560 Speaker 3: She never saw them. Per see, she assumed they were accurate. 79 00:04:43,680 --> 00:04:46,919 Speaker 3: Anything she did and she was involved in, she assumed 80 00:04:46,960 --> 00:04:50,720 Speaker 3: were accurate. But she distanced herself from the whole scenario. 81 00:04:50,920 --> 00:04:54,160 Speaker 3: How did these documents get created? It was not up 82 00:04:54,200 --> 00:04:57,440 Speaker 3: to her. With her father's business with his people, and 83 00:04:57,680 --> 00:05:00,200 Speaker 3: one of the interesting things about the Post Offices New 84 00:05:00,240 --> 00:05:03,360 Speaker 3: York Attorney General yesterday, the big project, and it was 85 00:05:03,400 --> 00:05:06,000 Speaker 3: like her claim to fame of this very successful deal 86 00:05:06,120 --> 00:05:10,200 Speaker 3: she did was the Post Office, but that the Government 87 00:05:10,279 --> 00:05:14,479 Speaker 3: Services Administration, which is the federal agency that administers and 88 00:05:14,640 --> 00:05:20,040 Speaker 3: overseas development and upkeep of federal buildings, is the agency 89 00:05:20,120 --> 00:05:22,720 Speaker 3: that the Trump org had to give this request for 90 00:05:22,880 --> 00:05:25,359 Speaker 3: proposal like a bid of how they were going to 91 00:05:25,400 --> 00:05:28,720 Speaker 3: do the building. And we saw documents that the Attorney 92 00:05:28,720 --> 00:05:32,280 Speaker 3: General showed her. There was called the GSA because that's 93 00:05:32,320 --> 00:05:36,920 Speaker 3: the Government Services Administration Deficiency Letter, where they pointed out 94 00:05:37,000 --> 00:05:42,040 Speaker 3: that they were concerned about incorrect or incomplete information provided 95 00:05:42,120 --> 00:05:47,359 Speaker 3: by the Trump organization, including whether the statements applied with 96 00:05:47,480 --> 00:05:51,520 Speaker 3: the General Accounting principles and that the statement of financial 97 00:05:51,520 --> 00:05:55,560 Speaker 3: conditions were incomplete. And she did not remember there was 98 00:05:55,560 --> 00:05:57,919 Speaker 3: something done. Maybe it was got given to her, but 99 00:05:58,000 --> 00:06:01,800 Speaker 3: it was basically in her involvement, according to her, was 100 00:06:01,800 --> 00:06:05,440 Speaker 3: on a much more a higher level. She was at 101 00:06:05,480 --> 00:06:09,640 Speaker 3: the top over this massive project and she basically left 102 00:06:09,680 --> 00:06:11,920 Speaker 3: the Trump people to deal with it. So if there 103 00:06:11,960 --> 00:06:15,160 Speaker 3: was any issue, it really wasn't her. And she did 104 00:06:15,240 --> 00:06:17,599 Speaker 3: try to keep distancing herself with this deficiency. 105 00:06:18,120 --> 00:06:21,200 Speaker 2: She also did follow the lead of her father and 106 00:06:21,320 --> 00:06:25,960 Speaker 2: brothers in contending that the family business has over delivered 107 00:06:26,000 --> 00:06:27,560 Speaker 2: on every metric. 108 00:06:27,720 --> 00:06:30,880 Speaker 3: Oh, and that was one of her key. She was 109 00:06:31,000 --> 00:06:33,919 Speaker 3: like the spokes model for the Trump family business that 110 00:06:34,240 --> 00:06:38,279 Speaker 3: everything her father did and certainly any project she was 111 00:06:38,320 --> 00:06:41,680 Speaker 3: involved with. And there were three main projects that she 112 00:06:41,760 --> 00:06:44,560 Speaker 3: seemed to have a lot of dealings with. That was 113 00:06:44,600 --> 00:06:49,120 Speaker 3: the Durrell Golf Course in Florida, the Post Office l 114 00:06:49,240 --> 00:06:54,560 Speaker 3: Post Office in Washington, DC, and this Trump Tower hotel 115 00:06:55,000 --> 00:07:00,080 Speaker 3: development that was built in Chicago. So she said that 116 00:07:00,200 --> 00:07:04,200 Speaker 3: everything that the Trump did regarding those three projects that 117 00:07:04,279 --> 00:07:07,040 Speaker 3: involved her prior to her going to join her father 118 00:07:07,120 --> 00:07:10,680 Speaker 3: in DC and help work in his administration, had been 119 00:07:11,600 --> 00:07:14,040 Speaker 3: overdelivered in every metric. 120 00:07:14,360 --> 00:07:17,600 Speaker 2: Pat she didn't hurt her father, but did she help 121 00:07:17,640 --> 00:07:18,960 Speaker 2: the Attorney General's case. 122 00:07:19,520 --> 00:07:21,960 Speaker 3: You know, this case is I think I've said before, 123 00:07:22,120 --> 00:07:25,080 Speaker 3: you know, the age has to prove their case and 124 00:07:25,120 --> 00:07:27,200 Speaker 3: you're not going to get the smoking gun out of 125 00:07:27,240 --> 00:07:29,880 Speaker 3: the people that are defendants or their relatives. And that's 126 00:07:29,920 --> 00:07:32,680 Speaker 3: what the Trump family is. It's a bunch of people 127 00:07:32,680 --> 00:07:34,640 Speaker 3: that are in this company and they work for their 128 00:07:34,680 --> 00:07:37,720 Speaker 3: father and Donald Trump is the top of the Pyramids, 129 00:07:38,240 --> 00:07:42,400 Speaker 3: and AG has to prove its case by calling these people, 130 00:07:42,840 --> 00:07:45,920 Speaker 3: getting them to give their version of what reality is 131 00:07:46,040 --> 00:07:48,880 Speaker 3: and what the evidence is, and confront them with whatever 132 00:07:48,960 --> 00:07:51,920 Speaker 3: documents that are there, and then the judge has to 133 00:07:52,280 --> 00:07:54,960 Speaker 3: intue it from that whether or not they're telling the 134 00:07:55,000 --> 00:07:58,200 Speaker 3: truth and did the documents prove otherwise. So I believe 135 00:07:58,360 --> 00:08:02,000 Speaker 3: they had to call her basically just to say, yes, 136 00:08:02,040 --> 00:08:05,040 Speaker 3: you're right, I did sign that document. Yes, I did 137 00:08:05,080 --> 00:08:07,880 Speaker 3: a test that it was honest. Yes, I did sign 138 00:08:07,960 --> 00:08:11,000 Speaker 3: this along with my father, and that is my father's signature, 139 00:08:11,080 --> 00:08:14,200 Speaker 3: and yes he submitted it attesting to the US government 140 00:08:14,880 --> 00:08:19,160 Speaker 3: that his statements of financial condition were sound and accurate. 141 00:08:19,600 --> 00:08:22,760 Speaker 3: So basically that's all they really need her for, right 142 00:08:22,800 --> 00:08:25,600 Speaker 3: because they can basically say yes, that's a legit prompt 143 00:08:25,680 --> 00:08:30,000 Speaker 3: organization document and that the defense can't say otherwise, and 144 00:08:30,040 --> 00:08:33,640 Speaker 3: then they prove it through other means, including evidence that 145 00:08:34,160 --> 00:08:37,360 Speaker 3: undercuts the claims of the defendants and the relatives. 146 00:08:37,520 --> 00:08:40,960 Speaker 2: And she gets off by saying I signed that, I 147 00:08:41,000 --> 00:08:44,360 Speaker 2: did that, but I wasn't involved in preparing or looking 148 00:08:44,400 --> 00:08:46,599 Speaker 2: at his personal financial statements. 149 00:08:47,440 --> 00:08:51,040 Speaker 3: Yes, she distanced herself with everything I signed, I assused 150 00:08:51,080 --> 00:08:55,400 Speaker 3: was accurate and truthful, and I wasn't involved in the 151 00:08:55,559 --> 00:08:58,360 Speaker 3: gnitty gritty detail that was not her terminology, that she 152 00:08:58,520 --> 00:09:02,280 Speaker 3: was not so grandularly involved in these day to day 153 00:09:03,120 --> 00:09:07,760 Speaker 3: instances of who actually created these statements of financial condition. 154 00:09:08,720 --> 00:09:12,160 Speaker 2: So the defense begins Monday, and they said they're going 155 00:09:12,200 --> 00:09:14,600 Speaker 2: to take into the middle of next month. 156 00:09:15,040 --> 00:09:18,680 Speaker 3: Yeah. Originally this trial we're supposed to go till December 157 00:09:18,720 --> 00:09:23,559 Speaker 3: twenty second, which is creepingly close to Christmas Day and 158 00:09:23,679 --> 00:09:28,040 Speaker 3: the Christmas holidays. And now defense said they are going 159 00:09:28,080 --> 00:09:30,520 Speaker 3: to start on Monday. They were actually asked to start 160 00:09:30,559 --> 00:09:35,080 Speaker 3: today because the Attorney General arrested yesterday and finish their 161 00:09:35,120 --> 00:09:38,120 Speaker 3: direct case. And now they say they hope to finish 162 00:09:38,160 --> 00:09:41,840 Speaker 3: by December fifteenth. The rumor going around is that possibly 163 00:09:41,960 --> 00:09:45,480 Speaker 3: Dawn Junior will come back on Monday, and the defense 164 00:09:45,520 --> 00:09:48,200 Speaker 3: has claimed that they want to call Trump back on 165 00:09:48,240 --> 00:09:50,760 Speaker 3: their own case. It's unclear if you will though. 166 00:09:51,000 --> 00:09:53,400 Speaker 2: Well, Pat, it may be a long trial, but it 167 00:09:53,480 --> 00:09:56,199 Speaker 2: certainly seems like an interesting one. Thank you so much 168 00:09:56,240 --> 00:09:58,960 Speaker 2: for bringing that inside look from the courtroom. 169 00:09:59,120 --> 00:10:01,400 Speaker 1: That's Bloomberg Legal reporter Patricia Hurtado. 170 00:10:08,920 --> 00:10:10,520 Speaker 4: I call it the wheel. 171 00:10:13,559 --> 00:10:16,720 Speaker 1: I don't think so, what does it do the rules. 172 00:10:16,800 --> 00:10:17,880 Speaker 5: Yeah, so does a bagel? 173 00:10:18,000 --> 00:10:19,439 Speaker 2: Okay, a bengel you can eat. 174 00:10:20,400 --> 00:10:22,600 Speaker 5: One of the worst ideas I've ever heard. Like I 175 00:10:22,640 --> 00:10:25,000 Speaker 5: was saying, it's FTX, it's a safe and easy way 176 00:10:25,000 --> 00:10:25,680 Speaker 5: to get into crypto. 177 00:10:28,400 --> 00:10:29,000 Speaker 2: I don't think so. 178 00:10:29,800 --> 00:10:31,440 Speaker 5: And I'm never wrong about this stuff. 179 00:10:31,960 --> 00:10:36,360 Speaker 2: Never remember that Larry David commercial for FTX that had 180 00:10:36,360 --> 00:10:39,080 Speaker 2: them laughing at the Super Bowl in twenty twenty two, 181 00:10:39,559 --> 00:10:43,280 Speaker 2: And there was also Tom Brady touting FTX and commercials 182 00:10:43,559 --> 00:10:47,959 Speaker 2: Giselle Bunch and Steph Curry and Shaquille O'Neil, among others. Well, 183 00:10:48,120 --> 00:10:51,440 Speaker 2: investors who claim they lost billions in the collapse of 184 00:10:51,600 --> 00:10:54,960 Speaker 2: FTX are trying to pin the blame not just on 185 00:10:55,080 --> 00:10:58,640 Speaker 2: Sam Bankman Freed in his inner circle, but also on 186 00:10:58,720 --> 00:11:03,280 Speaker 2: the celebrities who were to endorse it, as well as bankers, accountants, 187 00:11:03,280 --> 00:11:07,000 Speaker 2: and lawyers who propped up the crypto Exchange is legitimacy. 188 00:11:07,440 --> 00:11:11,240 Speaker 2: Joining me is Braden Perry, a former federal regulatory enforcement 189 00:11:11,320 --> 00:11:14,520 Speaker 2: attorney and a partner at Kenny Hurts Perry. So this 190 00:11:14,559 --> 00:11:17,040 Speaker 2: is a class action lawsuit, tell us about it. 191 00:11:17,360 --> 00:11:19,600 Speaker 5: Yeah, So this is a loss that was brought by 192 00:11:20,360 --> 00:11:23,520 Speaker 5: a number of individuals who where their investors or had 193 00:11:23,520 --> 00:11:27,160 Speaker 5: some sort of financial interest in FTX, and they brought 194 00:11:27,200 --> 00:11:32,520 Speaker 5: it against a number of various entities, including celebrity endorsers, accountants, 195 00:11:32,679 --> 00:11:36,160 Speaker 5: the actual members of FTX itself, as well as others. 196 00:11:36,200 --> 00:11:41,839 Speaker 5: So it's a wide ranging case that essentially boils down 197 00:11:41,920 --> 00:11:47,120 Speaker 5: to FTX was falsely providing information to the public, and 198 00:11:47,240 --> 00:11:50,160 Speaker 5: the public somehow either invested or had some sort of 199 00:11:50,160 --> 00:11:52,720 Speaker 5: financial interest in FTX and therefore were harmed. 200 00:11:53,240 --> 00:11:57,000 Speaker 2: So let's start with the celebrities, because that's where everyone starts, 201 00:11:57,200 --> 00:12:02,240 Speaker 2: correct and those advertisements by Larry David and Tom Brady, 202 00:12:02,320 --> 00:12:05,920 Speaker 2: the commercials were played at the beginning of SBF's trial. 203 00:12:06,360 --> 00:12:10,080 Speaker 2: So what does the law require of celebrity endorsers. 204 00:12:10,480 --> 00:12:13,600 Speaker 5: So generally the law requires not much. And what it 205 00:12:13,640 --> 00:12:17,000 Speaker 5: requires is that the celebrity endorser knows what the product 206 00:12:17,080 --> 00:12:20,160 Speaker 5: is and how it works. And two that generally there's 207 00:12:20,160 --> 00:12:22,679 Speaker 5: some sort of disclaimer, ordinarily at the bottom of the 208 00:12:22,720 --> 00:12:26,160 Speaker 5: advertisement or elsewhere it indicates celebrity endorser is a paid 209 00:12:26,240 --> 00:12:29,480 Speaker 5: endorser for that product as well as the truthfulness. And 210 00:12:29,559 --> 00:12:33,280 Speaker 5: so the endorser cannot provide information that's false or misleading 211 00:12:33,400 --> 00:12:33,960 Speaker 5: to the public. 212 00:12:34,679 --> 00:12:38,240 Speaker 2: So then does that mean that Jennifer Garner actually has 213 00:12:38,280 --> 00:12:41,480 Speaker 2: to use the drugstore creams she claims she uses. 214 00:12:41,880 --> 00:12:45,400 Speaker 5: Generally that's the case, and so you'll see these advertisements 215 00:12:45,440 --> 00:12:48,760 Speaker 5: with certain restaurants where celebrities are at, or certain products 216 00:12:48,760 --> 00:12:52,080 Speaker 5: that they're using, and it's not an exclusive use, and 217 00:12:52,160 --> 00:12:53,960 Speaker 5: so it can be a very high level. So if 218 00:12:54,000 --> 00:12:57,760 Speaker 5: Jenner Garner has used a product that's been provided to her, 219 00:12:58,040 --> 00:13:00,960 Speaker 5: she can certainly endorse that product. So it's not a 220 00:13:01,040 --> 00:13:05,280 Speaker 5: lifelong or a over the top type of use requirement. 221 00:13:05,360 --> 00:13:08,280 Speaker 5: But generally, Yeah, if a celebrity endorser is going to 222 00:13:08,360 --> 00:13:11,840 Speaker 5: endorse a product, that celebrity endorsers should be using that product. 223 00:13:12,280 --> 00:13:14,959 Speaker 2: So does that mean that Tom Brady and Larry David 224 00:13:14,960 --> 00:13:18,400 Speaker 2: and all the others should have been invested in FTX. 225 00:13:18,960 --> 00:13:20,400 Speaker 5: Yeah, I don't know if they should have been invested 226 00:13:20,400 --> 00:13:23,839 Speaker 5: in FTX. Obviously they should have known what FTX is 227 00:13:23,920 --> 00:13:26,679 Speaker 5: and what it does, and that would likely be the 228 00:13:26,760 --> 00:13:29,240 Speaker 5: are exchange of choice if they were going to be 229 00:13:29,280 --> 00:13:33,440 Speaker 5: part of the crypto movement, not necessarily a needed part 230 00:13:33,640 --> 00:13:34,400 Speaker 5: of that movement. 231 00:13:34,559 --> 00:13:39,040 Speaker 2: That's why I'm wondering when sophisticated investors didn't know about 232 00:13:39,200 --> 00:13:42,400 Speaker 2: FTX and the government found out much later. 233 00:13:42,800 --> 00:13:45,040 Speaker 1: How are celebrities supposed to know? 234 00:13:45,520 --> 00:13:46,959 Speaker 5: And that's a big question that's going to be the 235 00:13:47,080 --> 00:13:50,760 Speaker 5: legal question is what did the celebrities know? What influence 236 00:13:50,800 --> 00:13:54,280 Speaker 5: did they have on these investments? And that's really the 237 00:13:54,320 --> 00:13:57,600 Speaker 5: crux of the legal argument in this case. The class 238 00:13:57,640 --> 00:14:02,920 Speaker 5: action is so wide with all the different entities associated 239 00:14:03,000 --> 00:14:05,760 Speaker 5: with FTX. You know, the accountant standbackmen Freed is one 240 00:14:05,800 --> 00:14:09,320 Speaker 5: of the defendants, all these celebrity endorsers, everyone is involved, 241 00:14:09,360 --> 00:14:12,280 Speaker 5: and so there's going to be from the defense side 242 00:14:12,760 --> 00:14:15,040 Speaker 5: lots of finger pointing as to who knew what and 243 00:14:15,080 --> 00:14:17,760 Speaker 5: when and where and how, and so that's really going 244 00:14:17,800 --> 00:14:20,320 Speaker 5: to be what the plans need to prove is whether 245 00:14:20,360 --> 00:14:24,440 Speaker 5: or not these celebrity endorsers were intricate in this false 246 00:14:24,800 --> 00:14:26,120 Speaker 5: and misleading product. 247 00:14:26,920 --> 00:14:30,160 Speaker 2: Some of the lawyers for the celebrities are saying that 248 00:14:30,760 --> 00:14:34,440 Speaker 2: the investors have no valid claim against them because the 249 00:14:34,520 --> 00:14:39,360 Speaker 2: advertisements and sponsorships they were involved and didn't specifically encourage 250 00:14:39,360 --> 00:14:43,160 Speaker 2: anyone to deposit money in FTX accounts. That seems weird 251 00:14:43,920 --> 00:14:46,680 Speaker 2: because that's what the ad is for, right, Also that 252 00:14:47,120 --> 00:14:51,160 Speaker 2: they never pitched the accounts at issue in the SBF case. 253 00:14:51,560 --> 00:14:54,160 Speaker 1: Do those sound like typical defenses. 254 00:14:54,680 --> 00:14:56,880 Speaker 5: They sound like typical defenses. Whether or not they will 255 00:14:56,920 --> 00:15:01,520 Speaker 5: be successful is another story. Sence teams have several different 256 00:15:01,520 --> 00:15:04,480 Speaker 5: lines of defense. As you mentioned, you know, they weren't 257 00:15:04,560 --> 00:15:08,080 Speaker 5: specific to the actual accounts. They didn't provide terms or 258 00:15:08,080 --> 00:15:11,520 Speaker 5: conditions of the accounts. They weren't detailing what the accounts 259 00:15:11,560 --> 00:15:14,520 Speaker 5: could or could not do, and so that's general of 260 00:15:14,600 --> 00:15:18,680 Speaker 5: defense to the claims. However, they knew or should have known, 261 00:15:18,920 --> 00:15:22,600 Speaker 5: that there was misleading information by not providing some of 262 00:15:22,600 --> 00:15:25,720 Speaker 5: that information about these accounts, and that can be counterproductive 263 00:15:25,800 --> 00:15:29,120 Speaker 5: to their case. Also, if I'm sitting on the defense 264 00:15:29,240 --> 00:15:33,760 Speaker 5: table and I see that the main group, the head 265 00:15:33,840 --> 00:15:38,160 Speaker 5: of FTX, has been convicted of crimes, I'm certainly pointing 266 00:15:38,160 --> 00:15:41,680 Speaker 5: to that saying, hey, these people were committing crimes, were 267 00:15:41,760 --> 00:15:43,360 Speaker 5: victims just as much as you were. 268 00:15:43,920 --> 00:15:48,240 Speaker 2: Yeah, So the Sam bankman freed conviction and the guilty 269 00:15:48,280 --> 00:15:52,600 Speaker 2: please of his inner circle should be helpful to the 270 00:15:52,640 --> 00:15:57,080 Speaker 2: defendants here. Now, some of the other targets of the 271 00:15:57,320 --> 00:16:03,560 Speaker 2: lawsuit are professional advisors, ranging from an accounting firm, investment firm, 272 00:16:03,960 --> 00:16:08,520 Speaker 2: and a bank. Those seem like more reasonable defendants to me. 273 00:16:09,600 --> 00:16:13,200 Speaker 5: Yeah, and they should be and ordinarily, when you find 274 00:16:13,240 --> 00:16:18,240 Speaker 5: and you look at the past history of massive frauds 275 00:16:18,280 --> 00:16:21,960 Speaker 5: in finance, made off as the best picture of that. 276 00:16:22,400 --> 00:16:27,800 Speaker 5: There is still ongoing litigation involving accountants, professional individuals who 277 00:16:28,240 --> 00:16:31,520 Speaker 5: had some part of his scheme. That's the case here. 278 00:16:31,560 --> 00:16:34,400 Speaker 5: You know, obviously, the accountants, the investment firms, all of 279 00:16:34,440 --> 00:16:39,320 Speaker 5: these pieces we were part of the ongoing massive dollars 280 00:16:39,360 --> 00:16:43,120 Speaker 5: that FTX was bringing in and maintaining during its lifetime. 281 00:16:43,320 --> 00:16:48,840 Speaker 5: And those are the traditional defendants you'd see celebrity endorsers. Frankly, 282 00:16:49,160 --> 00:16:52,480 Speaker 5: you don't see that often. And I think that you know, 283 00:16:52,520 --> 00:16:56,040 Speaker 5: obviously there have been a group that have settled just 284 00:16:56,080 --> 00:16:58,360 Speaker 5: because likely they didn't want to be bothered with the 285 00:16:58,400 --> 00:17:02,000 Speaker 5: litigation or part of the litigation, and there's a valid 286 00:17:02,040 --> 00:17:04,399 Speaker 5: reason to settle and get out. But I think the 287 00:17:04,440 --> 00:17:07,440 Speaker 5: ones that are still in there have relatively valid defenses 288 00:17:07,520 --> 00:17:10,600 Speaker 5: that one they were victims too, and two that their 289 00:17:10,680 --> 00:17:15,280 Speaker 5: endorsements had no input on what the actual underlying fraud 290 00:17:15,320 --> 00:17:16,560 Speaker 5: of FTCH was about. 291 00:17:17,240 --> 00:17:22,320 Speaker 2: Last year, federal judge dismissed a lawsuit from investors that 292 00:17:22,359 --> 00:17:27,320 Speaker 2: accused Kim Kardashian, boxer Floyd Mayweather, and others of endorsing 293 00:17:27,600 --> 00:17:31,800 Speaker 2: a cryptocurrency known as ethereum Max. So I mean that 294 00:17:31,840 --> 00:17:34,760 Speaker 2: could happen here, But is there a lot of pressure 295 00:17:34,960 --> 00:17:37,080 Speaker 2: on the celebrities to settle. 296 00:17:38,119 --> 00:17:41,439 Speaker 5: So it's the big gamble on litigation in the end, 297 00:17:41,480 --> 00:17:44,679 Speaker 5: as a gamble, you can spend a lot of money 298 00:17:45,400 --> 00:17:50,000 Speaker 5: trying to defend yourself and either get dismissed through summary judgment, 299 00:17:50,320 --> 00:17:55,160 Speaker 5: through motion to dismiss through other type of non trial activity, 300 00:17:55,760 --> 00:17:58,040 Speaker 5: and it's still at the end of the day going 301 00:17:58,119 --> 00:18:00,399 Speaker 5: to cost you money. And so there's a lot of 302 00:18:01,240 --> 00:18:03,920 Speaker 5: times than you know, when I'm I'm dealing with litigation 303 00:18:04,000 --> 00:18:06,360 Speaker 5: and my clients, I talk to them about the financial 304 00:18:06,440 --> 00:18:09,240 Speaker 5: aspects of taking something to trial. You know, what what 305 00:18:09,320 --> 00:18:12,160 Speaker 5: will that cost number one? And what is the actual 306 00:18:12,560 --> 00:18:16,399 Speaker 5: potential cost from an adverse decision at trial? And a 307 00:18:16,400 --> 00:18:20,280 Speaker 5: lot of times, you know, you find a middle ground 308 00:18:20,440 --> 00:18:24,600 Speaker 5: with the other side from a litigation standpoint, where it 309 00:18:24,640 --> 00:18:28,120 Speaker 5: makes more sense to settle and move on as opposed 310 00:18:28,160 --> 00:18:31,640 Speaker 5: to to trying to defend yourself months and months down 311 00:18:31,640 --> 00:18:33,680 Speaker 5: the road. It takes an emotional toll, it takes a 312 00:18:33,720 --> 00:18:37,600 Speaker 5: financial toll. Litigation is not fun and many. 313 00:18:37,359 --> 00:18:37,919 Speaker 2: Times not. 314 00:18:39,960 --> 00:18:41,920 Speaker 5: Well. Some of these lawyers I think are probably having 315 00:18:41,920 --> 00:18:43,879 Speaker 5: a good time with this, but it's certainly from a 316 00:18:43,920 --> 00:18:47,400 Speaker 5: defendant or plaintiff standpoint, there's a lot that goes into it, 317 00:18:47,480 --> 00:18:51,159 Speaker 5: and it's certainly you know, when when I have large 318 00:18:51,200 --> 00:18:56,359 Speaker 5: cases that involved a long time of litigation, it's not 319 00:18:56,480 --> 00:18:59,639 Speaker 5: easy on on either defendance or plaintiffs. It takes a 320 00:18:59,640 --> 00:19:02,719 Speaker 5: lot of emotional toll from individuals when you're dealing with 321 00:19:02,760 --> 00:19:04,120 Speaker 5: litigation day in and day out. 322 00:19:04,320 --> 00:19:07,240 Speaker 2: It certainly does not to mention the cost of litigation. 323 00:19:08,359 --> 00:19:12,640 Speaker 2: As you mentioned, Bernie Madeoff the investors suits played out 324 00:19:12,640 --> 00:19:15,160 Speaker 2: for well over a decade, still some playing out. 325 00:19:15,560 --> 00:19:20,080 Speaker 1: Do you think the SBF case is even more complicated 326 00:19:20,119 --> 00:19:22,720 Speaker 1: to unwind than the Madoff Yeah, I do. 327 00:19:23,080 --> 00:19:25,440 Speaker 5: You know, we've been talking strictly about this one plane 328 00:19:25,440 --> 00:19:28,159 Speaker 5: of case involves a number of celebrity endorsers. You have 329 00:19:28,200 --> 00:19:31,880 Speaker 5: to remember that the criminal case is essentially over. There 330 00:19:31,880 --> 00:19:34,040 Speaker 5: will be appeals, there will be other issues in this, 331 00:19:34,160 --> 00:19:37,119 Speaker 5: although I don't think many of those keel issues. He 332 00:19:37,240 --> 00:19:39,040 Speaker 5: was convicted. I think he'll be sentenced and I don't 333 00:19:39,040 --> 00:19:41,639 Speaker 5: think any appeals will be successful. Then you got the 334 00:19:41,680 --> 00:19:44,080 Speaker 5: regulatory action, so you got the CFTC, you got the 335 00:19:44,119 --> 00:19:48,640 Speaker 5: sec ordinarily within these parallel criminal cases, those cases likely 336 00:19:48,680 --> 00:19:51,520 Speaker 5: will be settled because there's not much else to go after. 337 00:19:52,040 --> 00:19:56,040 Speaker 5: The big issue is going to be bankruptcy receiverships in 338 00:19:56,080 --> 00:19:59,879 Speaker 5: the different jurisdictions and trying to claw back is the 339 00:20:00,160 --> 00:20:04,320 Speaker 5: much of this lost money as possible to provide to investors. 340 00:20:04,359 --> 00:20:06,679 Speaker 5: So that's going to be the main focus for the 341 00:20:06,720 --> 00:20:10,840 Speaker 5: next decade is the severship action to claw back all 342 00:20:10,920 --> 00:20:14,600 Speaker 5: this individual funds from all these various entities. And then 343 00:20:14,640 --> 00:20:17,800 Speaker 5: you'll have these civil cases that are trying to find 344 00:20:17,960 --> 00:20:21,560 Speaker 5: those that may not have exposure otherwise, so these celebrity endorsers, 345 00:20:21,600 --> 00:20:24,520 Speaker 5: those types of things, and so it's going to be complicated. 346 00:20:24,640 --> 00:20:29,200 Speaker 5: And the fact that that crypto wasn't regulated like Madoff's 347 00:20:29,400 --> 00:20:34,000 Speaker 5: Ponzi scheme was. There's no central regulator and you get 348 00:20:34,000 --> 00:20:36,439 Speaker 5: the SEC, you got the CFTC that are part of this, 349 00:20:36,600 --> 00:20:39,840 Speaker 5: but unlike Madeoff where you could point directly at the SEC, 350 00:20:39,880 --> 00:20:43,880 Speaker 5: there's really no nexus of jurisdiction between anyone. So it's 351 00:20:43,880 --> 00:20:46,159 Speaker 5: going to take a long time. You know, FTX at 352 00:20:46,200 --> 00:20:49,520 Speaker 5: offices all over the place, there's multiple jurisdictions. It will 353 00:20:49,520 --> 00:20:52,679 Speaker 5: take a while to unwind what this is becoming. It 354 00:20:52,720 --> 00:20:55,360 Speaker 5: could be could be longer than what Madeoff's looked at 355 00:20:55,760 --> 00:20:56,280 Speaker 5: and at. 356 00:20:56,200 --> 00:21:00,680 Speaker 2: The sentencing of Sam Bankman Freed and the three people flipped, 357 00:21:01,040 --> 00:21:03,200 Speaker 2: will the judge order restitution The. 358 00:21:03,160 --> 00:21:06,000 Speaker 5: Way it generally works when it comes to parallel criminal 359 00:21:06,240 --> 00:21:11,200 Speaker 5: slash regulatory slash liquidation proceedings is anything the government gets, 360 00:21:11,200 --> 00:21:15,200 Speaker 5: and so as part of the sentencing for Sam beckmin Free, 361 00:21:15,400 --> 00:21:18,680 Speaker 5: for Carolyn Ellison, for Wang, for all of these individuals, 362 00:21:18,720 --> 00:21:22,520 Speaker 5: there'll be a restitution element as their sins and that 363 00:21:22,600 --> 00:21:27,080 Speaker 5: will go into the bucket of the receiver. So you'll 364 00:21:27,119 --> 00:21:31,200 Speaker 5: likely see any ill gotten gains these individuals received will 365 00:21:31,240 --> 00:21:33,960 Speaker 5: be part of that restitution order under the sentencing, that 366 00:21:34,040 --> 00:21:37,240 Speaker 5: will flow into the receivership action that will be part 367 00:21:37,320 --> 00:21:41,119 Speaker 5: of that bucket to provide to investors. So yeah, they 368 00:21:41,160 --> 00:21:45,439 Speaker 5: will likely have large restitution positions as part of their sensing. 369 00:21:45,880 --> 00:21:48,480 Speaker 2: Are there more of these class action lawsuits or has 370 00:21:48,520 --> 00:21:50,560 Speaker 2: this one been certified as a class Do you know? 371 00:21:50,920 --> 00:21:55,359 Speaker 5: When it comes to all of these different actions, there's 372 00:21:55,400 --> 00:21:58,959 Speaker 5: lots of priority and the priority number one was the 373 00:21:58,960 --> 00:22:02,600 Speaker 5: criminal case. While criminal case is ongoing, generally all the 374 00:22:02,640 --> 00:22:05,000 Speaker 5: stivil cases are stayed due to a number of different 375 00:22:05,040 --> 00:22:10,920 Speaker 5: evidentiary issues, issues with certain constitutional rights, those types of things. 376 00:22:11,119 --> 00:22:13,600 Speaker 5: That's the case in the Florida action. At this point 377 00:22:13,600 --> 00:22:18,040 Speaker 5: in time, there's been ongoing discovery about that class action. 378 00:22:18,200 --> 00:22:20,760 Speaker 5: There's not been a decision to certify the class action 379 00:22:20,880 --> 00:22:23,040 Speaker 5: as of yet, but I do know that there's a 380 00:22:23,119 --> 00:22:26,520 Speaker 5: number of different motions, a number of different procedural elements 381 00:22:26,520 --> 00:22:29,600 Speaker 5: that have been put on hold while the criminal case 382 00:22:29,680 --> 00:22:32,800 Speaker 5: is ongoing. Now the criminal case is over, I think 383 00:22:33,000 --> 00:22:35,359 Speaker 5: all of these courts are going to get back in 384 00:22:35,480 --> 00:22:39,240 Speaker 5: full gear to be addressing all of these issues now. 385 00:22:39,320 --> 00:22:41,040 Speaker 5: I mean there's going to be a number of evidentiary 386 00:22:41,080 --> 00:22:45,840 Speaker 5: issues from the trial. The vast government investigation could be 387 00:22:45,920 --> 00:22:48,560 Speaker 5: a treasure trove of information for the plaintiffs when it 388 00:22:48,600 --> 00:22:50,560 Speaker 5: comes to these types of things, and so the courts 389 00:22:50,560 --> 00:22:52,479 Speaker 5: are now going to have to face that issue and 390 00:22:52,640 --> 00:22:57,920 Speaker 5: begin moving again procedurally on these cases. Obviously, these are 391 00:22:58,240 --> 00:23:00,600 Speaker 5: interesting times that we live in when it comes to 392 00:23:00,640 --> 00:23:04,280 Speaker 5: crypto and I think this is another indication that at 393 00:23:04,280 --> 00:23:06,360 Speaker 5: some point there needs to be some sort of regulation 394 00:23:06,520 --> 00:23:09,280 Speaker 5: too sure that this doesn't happen again. But it's been 395 00:23:09,320 --> 00:23:12,119 Speaker 5: interesting in the process, and I think, you know, several 396 00:23:12,200 --> 00:23:15,920 Speaker 5: years ago looking at this. You wouldn't think that Sam 397 00:23:15,960 --> 00:23:19,800 Speaker 5: bad mcfreed, who had provided money to politicians, to businesses. 398 00:23:19,960 --> 00:23:24,000 Speaker 5: I mean FTX had its name on every umpire's suret 399 00:23:24,160 --> 00:23:26,159 Speaker 5: in Major League Baseball. So you en have thought of this, 400 00:23:26,400 --> 00:23:28,680 Speaker 5: and now we're here. So it's been an interesting time 401 00:23:28,720 --> 00:23:30,840 Speaker 5: and I think it will be certainly interesting for the 402 00:23:30,880 --> 00:23:34,440 Speaker 5: next few years and more in seeing how this all plays. 403 00:23:34,160 --> 00:23:37,520 Speaker 2: Out along Road Ahead. Thanks so much, Braiden. That's Braiden 404 00:23:37,600 --> 00:23:42,280 Speaker 2: Perry of Kenny Hurts Perry. Despite we Work's extraordinary fall 405 00:23:42,320 --> 00:23:46,120 Speaker 2: from grace, the company is attempting a comeback that starts 406 00:23:46,119 --> 00:23:49,560 Speaker 2: in New Jersey bankruptcy court, where it's arranged a path 407 00:23:49,600 --> 00:23:53,920 Speaker 2: to reorganize with speed and aggression by shrinking its physical 408 00:23:54,000 --> 00:23:57,760 Speaker 2: presence and reducing about three billion dollars of funded debt. 409 00:23:58,160 --> 00:24:01,760 Speaker 2: Joining me is corporate bankruptcy attorney Mark and Delcato, a 410 00:24:01,840 --> 00:24:03,400 Speaker 2: partner at Thompson Coburn. 411 00:24:04,200 --> 00:24:05,280 Speaker 1: Mark, what can you tell. 412 00:24:05,200 --> 00:24:08,119 Speaker 2: Us about we Work's Chapter eleven restructuring plan? 413 00:24:08,400 --> 00:24:11,280 Speaker 4: So as I understand it, although I haven't carefully studied 414 00:24:11,280 --> 00:24:14,000 Speaker 4: the document, what we Worked is going to attempt to 415 00:24:14,040 --> 00:24:17,639 Speaker 4: do is right size the business. The first step is 416 00:24:17,880 --> 00:24:20,280 Speaker 4: they've cut a deal with I believe it's ninety eight 417 00:24:20,280 --> 00:24:23,479 Speaker 4: percent of their secured lenders to convert a substantial amount 418 00:24:23,800 --> 00:24:27,160 Speaker 4: of the secured debt to equity. They've begun the process 419 00:24:27,200 --> 00:24:31,159 Speaker 4: of ridding themselves of leases that are a drain on 420 00:24:31,240 --> 00:24:34,040 Speaker 4: the company, and it seems that they're going to look 421 00:24:34,119 --> 00:24:37,800 Speaker 4: to right size into a profitable core and continue the 422 00:24:37,840 --> 00:24:38,840 Speaker 4: business going forward. 423 00:24:39,320 --> 00:24:43,000 Speaker 2: We work as entering bankruptcy with a restructuring plan already 424 00:24:43,040 --> 00:24:45,400 Speaker 2: hashed out with lenders in advance. 425 00:24:45,560 --> 00:24:47,320 Speaker 1: Is that unusual? You know? 426 00:24:47,520 --> 00:24:49,879 Speaker 4: I guess I would say in today's day and age, 427 00:24:49,920 --> 00:24:53,040 Speaker 4: I think it's becoming more common. I think what the 428 00:24:53,119 --> 00:24:56,840 Speaker 4: companies and their lawyers are looking at is the quicker 429 00:24:56,960 --> 00:24:59,840 Speaker 4: I can get through the bankruptcy process, the less of 430 00:25:00,040 --> 00:25:03,199 Speaker 4: total amounts of those restructuring costs will be. There is 431 00:25:03,240 --> 00:25:05,760 Speaker 4: a cost of running a bankruptcy, and as sooner we 432 00:25:05,800 --> 00:25:08,280 Speaker 4: get in and get out, that leaves us more money 433 00:25:08,320 --> 00:25:11,080 Speaker 4: to really put to the operations of the business. So 434 00:25:11,320 --> 00:25:13,679 Speaker 4: I think, you know, as time's gone on and the 435 00:25:13,720 --> 00:25:16,919 Speaker 4: costs of the bankruptcies of increase, I think more and 436 00:25:17,000 --> 00:25:20,639 Speaker 4: more you're seeing that bankruptcies. They're trying to do them 437 00:25:20,680 --> 00:25:23,600 Speaker 4: as quickly as possible. But dealing with all the important 438 00:25:23,640 --> 00:25:24,719 Speaker 4: issues while at it. 439 00:25:25,480 --> 00:25:29,560 Speaker 2: So this year we were excited substantial doubt about its 440 00:25:29,560 --> 00:25:32,679 Speaker 2: ability to stay in business following years of failing to 441 00:25:32,680 --> 00:25:37,359 Speaker 2: turn a profit. So what makes Chapter eleven different for them? 442 00:25:38,000 --> 00:25:41,880 Speaker 4: Well, the primary objective for them of Chapter eleven it's 443 00:25:41,880 --> 00:25:45,679 Speaker 4: twofold one. It gave them a platform to restructure with 444 00:25:45,800 --> 00:25:49,520 Speaker 4: their secured lenders. Now they could have done that given 445 00:25:49,560 --> 00:25:52,480 Speaker 4: that they're a small group outside of bankruptcy. But I 446 00:25:52,480 --> 00:25:55,199 Speaker 4: think the real power that we work as now in 447 00:25:55,240 --> 00:25:58,719 Speaker 4: bankruptcies to deal with the landlords because to the extent 448 00:25:58,920 --> 00:26:01,680 Speaker 4: there is the least that the unprofitable or they don't 449 00:26:01,680 --> 00:26:05,080 Speaker 4: want to continue in that particular market, the bankruptcy code 450 00:26:05,119 --> 00:26:07,560 Speaker 4: gives them the ability to reject that lease, and to 451 00:26:07,600 --> 00:26:10,840 Speaker 4: the extent they reject that lease, it becomes a prepetition 452 00:26:11,040 --> 00:26:13,840 Speaker 4: unsecured claim and so that will be dealt with that 453 00:26:14,080 --> 00:26:17,879 Speaker 4: in whatever the plan of reorganization is. But absent of bankruptcy, 454 00:26:18,200 --> 00:26:21,320 Speaker 4: if you just decide to vacate a premises, you have 455 00:26:21,400 --> 00:26:24,200 Speaker 4: to continue paying the rent you're obligated under the lease. 456 00:26:24,560 --> 00:26:28,600 Speaker 4: So it allows we work to free up substantial cash 457 00:26:28,840 --> 00:26:33,040 Speaker 4: for the go forward operations while resolving its lease issues 458 00:26:33,560 --> 00:26:37,200 Speaker 4: as prepetition claims, which generally get paid cents on the dollar. 459 00:26:37,720 --> 00:26:43,080 Speaker 2: Is this plan particularly aggressive or is the timeline particularly tight? 460 00:26:43,640 --> 00:26:45,480 Speaker 4: Well, as I said before, I think they want to 461 00:26:45,480 --> 00:26:48,200 Speaker 4: get in and out quickly. It is an aggressive timeline. 462 00:26:48,359 --> 00:26:50,040 Speaker 4: There are a lot of players, there are a lot 463 00:26:50,040 --> 00:26:53,160 Speaker 4: of issues that need to be gone through, and quite honestly, 464 00:26:53,200 --> 00:26:57,200 Speaker 4: there are many locations. I believe there's potentially six hundred 465 00:26:57,640 --> 00:27:02,240 Speaker 4: various rework locations throughout the country, and so I suspect 466 00:27:02,359 --> 00:27:04,399 Speaker 4: a lot of the work has been done already to 467 00:27:04,560 --> 00:27:07,960 Speaker 4: identify the leases and the locations in which they're going 468 00:27:08,000 --> 00:27:10,719 Speaker 4: to target. But doing all of that and having it 469 00:27:10,800 --> 00:27:13,280 Speaker 4: resolved by the end of March it is aggressive. It 470 00:27:13,400 --> 00:27:15,280 Speaker 4: in and out in five months, per a case of 471 00:27:15,359 --> 00:27:18,840 Speaker 4: the size where it's not just restructuring the secure debt 472 00:27:19,119 --> 00:27:20,440 Speaker 4: is a lot to take. 473 00:27:20,280 --> 00:27:22,360 Speaker 1: On after bankruptcy. 474 00:27:22,520 --> 00:27:25,840 Speaker 2: Are they going to end up being a smaller company? 475 00:27:26,359 --> 00:27:28,959 Speaker 4: That's what they're projecting to the marketplace, at least from 476 00:27:29,000 --> 00:27:31,600 Speaker 4: what everything I've read that seems to be what they're doing. 477 00:27:31,680 --> 00:27:33,959 Speaker 4: Is you know, when you look at it and you 478 00:27:34,000 --> 00:27:37,159 Speaker 4: read it, people are attributing a lot of different reasons 479 00:27:37,280 --> 00:27:41,480 Speaker 4: for we work bankruptcy, and these types of businesses have 480 00:27:41,600 --> 00:27:44,480 Speaker 4: been around, you know, for a long time. I believe 481 00:27:44,520 --> 00:27:46,240 Speaker 4: it was in two thousand and one there was a 482 00:27:46,240 --> 00:27:50,080 Speaker 4: company called H two Global Workplaces that filed in Delaware, 483 00:27:50,440 --> 00:27:53,360 Speaker 4: much smaller than we worked, but had similar issues. And 484 00:27:53,440 --> 00:27:57,240 Speaker 4: so I think what you're looking at is market conditions 485 00:27:57,400 --> 00:28:02,280 Speaker 4: compounded by a pandemic, compounded by interest rates have required 486 00:28:02,320 --> 00:28:05,000 Speaker 4: them to restructure their debts as we work. 487 00:28:05,119 --> 00:28:07,920 Speaker 2: Besides, you know which leases it wants to keep and 488 00:28:07,960 --> 00:28:11,960 Speaker 2: which it wants to let go and negotiates. Is we 489 00:28:12,080 --> 00:28:14,640 Speaker 2: works in charge of that or is the court looking 490 00:28:15,000 --> 00:28:16,399 Speaker 2: at what they're doing as well. 491 00:28:16,840 --> 00:28:20,280 Speaker 4: So initially we work as a debtor in possession, so 492 00:28:20,640 --> 00:28:23,480 Speaker 4: they are the ones in charge initially. So they will 493 00:28:23,480 --> 00:28:26,120 Speaker 4: make a plan to the court. A creditors committee will 494 00:28:26,119 --> 00:28:28,240 Speaker 4: be appointed based on the looks of it. It will 495 00:28:28,240 --> 00:28:31,520 Speaker 4: be dominated by landlords for releases which they probably have 496 00:28:31,600 --> 00:28:34,760 Speaker 4: already abandoned, and they will work in unison to develop 497 00:28:34,800 --> 00:28:37,400 Speaker 4: a plan and determine what the structure of the company 498 00:28:37,480 --> 00:28:40,640 Speaker 4: would be going forward. The creditors, at least the creditors 499 00:28:40,680 --> 00:28:44,280 Speaker 4: on the creditors committee, work piduciaries. Their objective is to 500 00:28:44,320 --> 00:28:48,520 Speaker 4: maximize the value for the unsecured claims, and so they'll 501 00:28:48,560 --> 00:28:52,080 Speaker 4: want to work with we work to try and maximize 502 00:28:52,080 --> 00:28:55,400 Speaker 4: its value going forward in a hope that the prepetition 503 00:28:55,520 --> 00:28:59,000 Speaker 4: creditors can receive some of that value going forward. 504 00:29:00,000 --> 00:29:03,120 Speaker 2: Some of the other advantages of bankruptcy that we haven't mentioned. 505 00:29:03,520 --> 00:29:05,840 Speaker 4: You put everything on hold, you know, the breathing spell 506 00:29:05,920 --> 00:29:08,320 Speaker 4: for the debt, or that gives them the ability to 507 00:29:08,360 --> 00:29:12,200 Speaker 4: really focus on operations while they're putting together a plan, 508 00:29:12,640 --> 00:29:14,959 Speaker 4: so they no longer have to worry about, you know, 509 00:29:15,280 --> 00:29:19,520 Speaker 4: dealing with particular landlords, dealing with potential default, dealing with 510 00:29:19,560 --> 00:29:22,120 Speaker 4: the interest payments on the debt. You're no longer on 511 00:29:22,160 --> 00:29:25,320 Speaker 4: this roller coaster up. Will they file this month? Will 512 00:29:25,320 --> 00:29:27,760 Speaker 4: they not file this month? They could really focus all 513 00:29:27,760 --> 00:29:31,880 Speaker 4: of their attention on making the company right and moving forward. 514 00:29:31,960 --> 00:29:34,720 Speaker 4: And it really, you know, that breathing spell, and people 515 00:29:34,720 --> 00:29:39,040 Speaker 4: don't necessarily recognize how important that is to have all 516 00:29:39,080 --> 00:29:45,040 Speaker 4: of the professionals financial advisors, attorneys and the senior management 517 00:29:45,120 --> 00:29:49,000 Speaker 4: focusing on this one goal of restructuring and moving forward 518 00:29:49,040 --> 00:29:52,120 Speaker 4: and developing a business plan. And so that's a tremendous 519 00:29:52,160 --> 00:29:53,240 Speaker 4: benefit of bankruptcy. 520 00:29:53,920 --> 00:29:57,560 Speaker 2: Does any company ever now file for regular bankruptcy. 521 00:29:57,760 --> 00:29:59,520 Speaker 1: All I ever hear of is Chapter eleven. 522 00:30:00,080 --> 00:30:02,840 Speaker 4: So when people think of regular bankruptcy, they really think 523 00:30:02,840 --> 00:30:06,000 Speaker 4: of Chapter seven. And what that means is the company 524 00:30:06,120 --> 00:30:09,000 Speaker 4: or the individual comes to the bankruptcy court says, I 525 00:30:09,040 --> 00:30:11,920 Speaker 4: can't pay my debt. Here are all my assets, here 526 00:30:11,800 --> 00:30:15,200 Speaker 4: are all my debts. I'm walking away starting fresh. You 527 00:30:15,360 --> 00:30:18,840 Speaker 4: deal with that, and generally in the business world, that 528 00:30:19,040 --> 00:30:21,960 Speaker 4: is an oddity. It has happened, and it does happen 529 00:30:22,000 --> 00:30:25,880 Speaker 4: on occasion. But when you talk about a business reorganization 530 00:30:26,080 --> 00:30:29,959 Speaker 4: or business bankruptcy, most of them start out in Chapter eleven. 531 00:30:30,120 --> 00:30:32,040 Speaker 4: Some of them, as a result of changes in the 532 00:30:32,040 --> 00:30:36,120 Speaker 4: Bankruptcy Code, are now utilizing the sort of modified Chapter eleven, 533 00:30:36,120 --> 00:30:39,080 Speaker 4: which is called the new Chapter five sub Chapter five cases, 534 00:30:39,400 --> 00:30:43,040 Speaker 4: and that's for smaller cases. But most businesses come into 535 00:30:43,200 --> 00:30:48,080 Speaker 4: bankruptcy with the hopes of either restructuring it and moving forward, 536 00:30:48,480 --> 00:30:52,760 Speaker 4: or there's another process that's utilized in bankruptcy, and that's 537 00:30:52,560 --> 00:30:55,960 Speaker 4: the sale process under three sixty three of the Bankruptcy Code, 538 00:30:56,320 --> 00:30:59,280 Speaker 4: and that allows its debt or to sell its assets 539 00:30:59,280 --> 00:31:02,480 Speaker 4: free and clear of lians. And that is a tremendous 540 00:31:02,480 --> 00:31:06,200 Speaker 4: benefit for debtors in possession because they get to attract 541 00:31:06,320 --> 00:31:08,840 Speaker 4: a whole new set of buyers who may be interested 542 00:31:08,840 --> 00:31:11,440 Speaker 4: in their assets, and they get to sell them free 543 00:31:11,480 --> 00:31:15,560 Speaker 4: of lians. So whoever purchases the assets knows that whatever 544 00:31:15,960 --> 00:31:19,520 Speaker 4: claims orleans existed, with some exceptions in the bankruptcy Code 545 00:31:19,640 --> 00:31:22,040 Speaker 4: prior to the filing, they don't have to deal with. 546 00:31:22,440 --> 00:31:25,200 Speaker 2: I know this is probably an unfair question, but do 547 00:31:25,240 --> 00:31:27,120 Speaker 2: you think that we Works will survive? 548 00:31:27,640 --> 00:31:27,880 Speaker 1: You know? 549 00:31:28,200 --> 00:31:30,920 Speaker 4: So, as I said earlier, there was a company H 550 00:31:31,040 --> 00:31:34,640 Speaker 4: two Global, and the way they survived is they ultimately 551 00:31:34,680 --> 00:31:38,440 Speaker 4: much smaller. They were sold to Regis, which was another 552 00:31:38,520 --> 00:31:40,880 Speaker 4: one of these types of companies. I think there is 553 00:31:40,920 --> 00:31:44,240 Speaker 4: a market for this business. I think, you know, we 554 00:31:44,400 --> 00:31:46,959 Speaker 4: Work took it to a different level with the amenities. 555 00:31:47,400 --> 00:31:49,760 Speaker 4: But if you look at what's going on in the 556 00:31:49,800 --> 00:31:53,760 Speaker 4: real estate market in the major metropolitan areas throughout the country, 557 00:31:54,240 --> 00:31:57,240 Speaker 4: buildings are looking to add amenities to their space to 558 00:31:57,320 --> 00:32:00,360 Speaker 4: get people to come back to work. So while they 559 00:32:00,400 --> 00:32:02,880 Speaker 4: may have spent a lot of money and to make 560 00:32:02,960 --> 00:32:06,800 Speaker 4: this space grand, you know, it may actually provide a 561 00:32:06,840 --> 00:32:10,800 Speaker 4: benefit in this new post pandemic world, and they may survive. 562 00:32:10,920 --> 00:32:13,320 Speaker 4: You know, it's all a matter of getting the debt 563 00:32:13,440 --> 00:32:17,360 Speaker 4: under control and repricing the leases. You know, when you 564 00:32:17,400 --> 00:32:20,760 Speaker 4: think about we worked, their inventory is their leases that 565 00:32:20,800 --> 00:32:23,680 Speaker 4: they entered into. And the rumors are on the street 566 00:32:23,720 --> 00:32:26,040 Speaker 4: that you know, when they started this, they were entering 567 00:32:26,040 --> 00:32:28,040 Speaker 4: it at the height of the rental market, and so 568 00:32:28,080 --> 00:32:31,239 Speaker 4: they paid you know, top dollar for these locations and 569 00:32:31,280 --> 00:32:34,160 Speaker 4: then they sort of added all of these amenities to them. 570 00:32:34,280 --> 00:32:37,760 Speaker 4: But now as the market has dropped, particularly post pandemic, 571 00:32:38,160 --> 00:32:40,880 Speaker 4: you can still only get what the market calls for. Right, 572 00:32:41,000 --> 00:32:43,600 Speaker 4: Maybe they'll get a little premium because of the amenities, 573 00:32:43,640 --> 00:32:46,080 Speaker 4: but you know, if their cost of their leases is 574 00:32:46,120 --> 00:32:48,280 Speaker 4: greater than the market, they're going to lose money no 575 00:32:48,280 --> 00:32:49,480 Speaker 4: matter how good the businesses. 576 00:32:50,160 --> 00:32:54,840 Speaker 2: We saw the pandemic causing bankruptcies. Is that phase over 577 00:32:54,960 --> 00:32:57,160 Speaker 2: with the bankruptcies from the pandemic. 578 00:32:57,280 --> 00:32:58,400 Speaker 1: This seems like it's one of them. 579 00:32:58,440 --> 00:33:00,560 Speaker 4: Actually, I think this is one of them. You know, 580 00:33:00,680 --> 00:33:04,320 Speaker 4: so in the bankruptcy community they expect there to be 581 00:33:04,360 --> 00:33:07,760 Speaker 4: a lot more bankruptcies into resulting from the pandemic. I 582 00:33:07,840 --> 00:33:10,479 Speaker 4: did an article for ABI sort of looking at some 583 00:33:10,560 --> 00:33:13,120 Speaker 4: of these things. When you push you know, three trillion 584 00:33:13,160 --> 00:33:16,240 Speaker 4: dollars through the economy, that takes a lot of time 585 00:33:16,320 --> 00:33:19,440 Speaker 4: to work its way through, and so I think you're 586 00:33:19,440 --> 00:33:24,280 Speaker 4: going to see more bankruptcies in the future for companies 587 00:33:24,280 --> 00:33:28,440 Speaker 4: that have been struggling because they've hopped all they can top. 588 00:33:28,840 --> 00:33:33,360 Speaker 4: Liquidity is drying up and interest rates are increasing, so 589 00:33:33,400 --> 00:33:35,960 Speaker 4: they cost of capital is increasing. So I think you're 590 00:33:36,000 --> 00:33:38,719 Speaker 4: going to see some more going forward. I don't know 591 00:33:38,840 --> 00:33:43,720 Speaker 4: necessarily their pandemic related, except for the fact if you 592 00:33:43,760 --> 00:33:48,120 Speaker 4: want to say that the government artificially kept interest rates 593 00:33:48,240 --> 00:33:51,800 Speaker 4: lower in nineteen and twenty and twenty one because of 594 00:33:51,840 --> 00:33:54,800 Speaker 4: the pandemic, and so we're having a much more rapid 595 00:33:54,800 --> 00:33:57,280 Speaker 4: increase in interest rates than we might otherwise have had 596 00:33:57,480 --> 00:34:00,600 Speaker 4: over the last five years. That may be pandemic related, 597 00:34:00,640 --> 00:34:02,680 Speaker 4: but I think this is partly a business cycle. 598 00:34:02,920 --> 00:34:06,600 Speaker 2: Thanks so much, Mark. That's Mark and Delcado of Thompson Coburn, 599 00:34:07,120 --> 00:34:09,440 Speaker 2: and that's it for this edition of The Bloomberg Law Show. 600 00:34:09,800 --> 00:34:12,120 Speaker 2: Remember you can always get the latest legal news on 601 00:34:12,160 --> 00:34:16,480 Speaker 2: our Bloomberg Law podcasts. You can find them on Apple Podcasts, Spotify, 602 00:34:16,640 --> 00:34:21,680 Speaker 2: and at www dot Bloomberg dot com, Slash podcast Slash Law, 603 00:34:22,080 --> 00:34:24,680 Speaker 2: And remember to tune into The Bloomberg Law Show every 604 00:34:24,719 --> 00:34:28,640 Speaker 2: weeknight at ten pm Wall Street Time. I'm June Grosso 605 00:34:28,760 --> 00:34:30,360 Speaker 2: and you're listening to Bloomberg