WEBVTT - US Crackdown on Sanctions Cheats Turning to Art Works 0:00:03.160 --> 0:00:07.960 This is Bloomberg Law with June Brusso from Bloomberg Radio. 0:00:10.280 --> 0:00:12.000 We're gonna start with a friend of Harris who's going 0:00:12.039 --> 0:00:14.400 to have some idea where the French art has been hidden. 0:00:14.480 --> 0:00:18.400 How can I hope who was still stolen? Not the 0:00:18.480 --> 0:00:20.479 Nazis are taken everything with him. So we have to 0:00:20.520 --> 0:00:23.479 get as close to the front as we can. Look 0:00:23.480 --> 0:00:26.360 at this. That says if Hitler dies or if Germany falls, 0:00:26.360 --> 0:00:30.720 there to destroy everything everything. Toward the end of World 0:00:30.760 --> 0:00:34.560 War Two, an army unit nicknamed the monuments Men race 0:00:34.680 --> 0:00:38.040 to track down and recover priceless artwork stolen by the 0:00:38.120 --> 0:00:41.800 Nazis before it could be destroyed or moved. The movie 0:00:41.880 --> 0:00:45.760 aptlete titled The monuments Men, is based on their recovery 0:00:45.760 --> 0:00:48.400 of more than five million works of art. It may 0:00:48.440 --> 0:00:50.840 not be as dramatic as going into a war zone, 0:00:51.120 --> 0:00:54.360 but today federal prosecutors in New York, known as the 0:00:54.440 --> 0:00:57.880 Klepto Captured Task Force, are working to track down and 0:00:57.920 --> 0:01:01.480 sees artworks boad or sold by Russian oligarchs as long 0:01:01.520 --> 0:01:05.280 as ten years ago, even targeting specific works of art 0:01:05.440 --> 0:01:09.320 like Mornes Lebasan on Nefia and serving subpoenas on high 0:01:09.440 --> 0:01:12.680 end auction houses. The goal is to get the assets 0:01:12.720 --> 0:01:15.760 before they can be moved to another jurisdiction. Joining me 0:01:15.800 --> 0:01:19.840 is Bloomberg Legal reporter Eva Benny Morrison. Eva tell us 0:01:19.840 --> 0:01:25.480 how the US expanded sanctions targeting Russian businessmen since the 0:01:25.520 --> 0:01:29.640 invasion of Ukraine last year. Since the invasion of Ukraine, 0:01:29.720 --> 0:01:32.959 and the US government has expanded the number of individuals 0:01:32.959 --> 0:01:35.920 that are on the sanctions list, and this was to 0:01:36.319 --> 0:01:39.959 put a lot of pressure on Russia and in protests 0:01:39.959 --> 0:01:42.840 in opposition to what they were doing in Ukraine. The 0:01:42.959 --> 0:01:47.600 US was targeting businessmen and their companies who had ties trutin. 0:01:48.000 --> 0:01:51.640 Number of these businessmen multi billionaires. They have an interest 0:01:51.720 --> 0:01:55.960 in the final things my real estate, artwork, yachts, cars, 0:01:56.120 --> 0:01:57.840 and all the rest of those things. And some of 0:01:57.880 --> 0:02:00.840 those assets have been contained and brought old traders in 0:02:00.880 --> 0:02:04.880 the US. So it's definitely impacted some of those items. 0:02:04.920 --> 0:02:10.040 So what are federal prosecutors looking into specifically with these 0:02:10.040 --> 0:02:11.880 works of art and all the rest of it. The 0:02:12.000 --> 0:02:14.640 US has had sanctions with for a long time, but 0:02:14.720 --> 0:02:18.120 there seems to be a real laser focus at the 0:02:18.200 --> 0:02:22.120 moment on figuring out if any of those sanctions are 0:02:22.200 --> 0:02:26.920 being violated for federal prosecutors attached to this relatively new 0:02:27.000 --> 0:02:31.840 task force called Clepto Capture trying to track down assets 0:02:31.880 --> 0:02:34.960 like artwork and Middle States that was bought and sold 0:02:35.040 --> 0:02:38.520 by Russian oligarchs anywhere from five to ten years ago. 0:02:39.080 --> 0:02:42.760 We've seen this focus in the art world. Recently, what's 0:02:42.800 --> 0:02:46.200 been happening is prosecutors are sending subpoenas to some of 0:02:46.200 --> 0:02:49.400 the major auction houses based in New York asking for 0:02:49.720 --> 0:02:54.480 any information to do with transactions with Russian oligarchs or 0:02:54.639 --> 0:02:58.160 with any shell companies that are known to be associated 0:02:58.200 --> 0:03:02.320 with those individuals. And over the past twelve to eighteen months, 0:03:02.360 --> 0:03:07.160 those inquiries have narrowed, so rather than just seeing prosecutors 0:03:07.200 --> 0:03:11.840 are asking for information about particular individuals Oleg Dairy, Pasca, 0:03:12.280 --> 0:03:15.280 Roman and Bromovich and a few other very well known 0:03:15.720 --> 0:03:19.679 Russian oligarchs, they're also asking for specific pieces of artwork, 0:03:20.120 --> 0:03:22.640 So that suggests that they've got some sort of intel 0:03:22.800 --> 0:03:26.320 about particular works that were bought and sold by these 0:03:26.360 --> 0:03:30.760 individuals or by companies linked to them. We've seen offshore 0:03:30.960 --> 0:03:35.840 as well. There's been a yacht owned by a Russian 0:03:35.880 --> 0:03:38.920 olgark that has been frozen off the coast of Spain, 0:03:39.120 --> 0:03:42.720 another one in the South Pacific, and there's also been 0:03:42.880 --> 0:03:45.680 real estate in d C and here in New York 0:03:45.720 --> 0:03:48.600 City that's been rated by the FBI is part of 0:03:48.600 --> 0:03:52.960 these investigations. Prosecutors alleged that these two properties in particular 0:03:53.240 --> 0:03:56.360 are linked to Russian billionaire by the name of ol 0:03:56.480 --> 0:04:00.360 Dairy Pasca. So the Department of Justice has indicated recently 0:04:00.600 --> 0:04:06.080 that they're planning to commence civil forfeiture proceedings against those properties. 0:04:06.280 --> 0:04:09.160 So are they not only looking at sanctions violations? Are 0:04:09.160 --> 0:04:12.880 they also looking at possible money laundering? Yes, the two 0:04:13.000 --> 0:04:16.120 sort of go hand in hand, I guess because some 0:04:16.200 --> 0:04:19.160 of the allegations in these types of cases usually are 0:04:19.200 --> 0:04:23.960 based around the fact that these assets like artwork, property, yachts, 0:04:24.279 --> 0:04:29.400 were obtained through ill gotten games, so that ties into 0:04:29.560 --> 0:04:32.640 the offense of money laundering. It can be very difficult 0:04:32.680 --> 0:04:37.240 to prosecute these sanctions cases, but that is definitely one 0:04:37.279 --> 0:04:40.880 line of inquiry that prosecutors are going down, and a 0:04:41.200 --> 0:04:44.640 bit of an associators avenue. I guess that they're looking 0:04:44.640 --> 0:04:48.800 at is the facilitators who exist around these oligarchs. We 0:04:48.839 --> 0:04:51.720 saw recently in the past couple of weeks there were 0:04:51.720 --> 0:04:55.760 a couple of associates allegedly tied to that same oligarch 0:04:55.800 --> 0:04:59.680 I mentioned earlier Oleg dairy Pasca, who are accused of 0:04:59.680 --> 0:05:03.840 money laundering and helping that oligarch of aide transaction. As 0:05:03.880 --> 0:05:07.440 you said that these sanctions cases are difficult to prosecute 0:05:07.520 --> 0:05:11.280 why a lot of these individuals are based offshore to 0:05:11.400 --> 0:05:15.920 start with, and secondly, it's not as easy as one 0:05:15.960 --> 0:05:19.360 of certain's best friends or his lawyer or his banker 0:05:19.839 --> 0:05:22.960 walking into an art gallery in Chelsea and buying a 0:05:23.240 --> 0:05:27.720 magnificent piece of artwork. A lot of these transactions are 0:05:27.839 --> 0:05:32.279 done through shell companies, relatives, names have been used in 0:05:32.320 --> 0:05:35.560 the past to purchase these kinds of assets, so it 0:05:35.600 --> 0:05:37.960 takes a very long time to sort of pick apart 0:05:38.120 --> 0:05:41.920 the web of corporate structures and other obscurities to try 0:05:41.960 --> 0:05:45.400 and figure out who the ultimate beneficial owner is of 0:05:45.440 --> 0:05:48.680 a particular assets. And one of the defenses that has 0:05:48.720 --> 0:05:51.520 been thrown up before from some of these oligarchs is 0:05:51.800 --> 0:05:54.520 all that property, all that asset is owned by a 0:05:54.600 --> 0:05:57.520 relative or a family member. It's not owned by may 0:05:57.720 --> 0:06:00.360 So that's why it can be particularly difficult to sort 0:06:00.360 --> 0:06:04.120 of way through all those complexities and jump over all 0:06:04.160 --> 0:06:09.279 those legal barricades. There are some very famous artworks involved here. 0:06:09.320 --> 0:06:13.560 When you mentioned your story, bought by fertilizer tycoon Andre 0:06:13.880 --> 0:06:19.240 Melnichenko was a mone that he paid apparently almost fifty 0:06:19.240 --> 0:06:23.080 million dollars for. So are they looking to prevent them 0:06:23.080 --> 0:06:25.360 from being moved? Are they looking to seize these so 0:06:25.440 --> 0:06:29.280 that they can stop any movement. Yes, they're going back 0:06:29.320 --> 0:06:33.680 and looking at artwork that these oligarchs had bought or 0:06:33.720 --> 0:06:36.159 sold many years ago and trying to figure out where 0:06:36.160 --> 0:06:39.720 they are now. Prosecutors are going back through years and 0:06:39.800 --> 0:06:43.080 years of records figure out whether artworks previously bought and 0:06:43.120 --> 0:06:46.080 sold by Russian oligarchs who are now in the sanctions 0:06:46.120 --> 0:06:48.520 list have been moved out of the country. If they 0:06:48.560 --> 0:06:51.279 have in the past twelve months from after the most 0:06:51.320 --> 0:06:53.920 recent round of sanctions, or even the individuals who Room 0:06:53.920 --> 0:06:56.640 of Sanctions listens to doesn't eighteen, that would be a 0:06:56.720 --> 0:06:59.480 violation of those sanctions. Who are trying to figure out 0:06:59.520 --> 0:07:02.080 where those work are, if they have been moved out 0:07:02.080 --> 0:07:03.960 of the country, how long ago they were moved out 0:07:03.960 --> 0:07:06.880 of the country, how they got out, whose names that 0:07:06.920 --> 0:07:09.240 they were shipped out of as well. You know a 0:07:09.320 --> 0:07:12.000 number of these oliser, their taste for art and their 0:07:12.040 --> 0:07:15.120 interest in art has been very well documented. And we're 0:07:15.120 --> 0:07:17.960 talking pieces worth millions and millions and millions of dollars. 0:07:18.080 --> 0:07:22.120 So it's been very interesting, I guess the prosecutors to 0:07:22.160 --> 0:07:25.560 try and figure out where some of these artworks are. 0:07:25.600 --> 0:07:28.040 And there's a recent case actually where one of the 0:07:28.080 --> 0:07:31.080 oliser had bought more than a dozen pieces of artwork 0:07:31.120 --> 0:07:33.040 in two thousand and eight and they just sat in 0:07:33.080 --> 0:07:36.600 a storage facility in New York until two thousand and 0:07:37.200 --> 0:07:40.560 eighteen nineteen, when someone who worked for him tried to 0:07:40.800 --> 0:07:43.120 have him set out of the country. Yeah, and that 0:07:43.480 --> 0:07:48.800 man has been indicted, Graham Bottom Carter, and he's fighting extradition, 0:07:49.360 --> 0:07:52.880 that's right. He's based in the UK, Graham Bottom Carter, 0:07:53.320 --> 0:07:57.120 and he was working for over Dairy Pasca, and the 0:07:57.200 --> 0:08:00.480 prosecutors alleged that while he was based in the UK, 0:08:00.800 --> 0:08:05.000 he contacted an auction house in New York and tried 0:08:05.040 --> 0:08:08.640 to pass off Derry Pasker's artworks as his own. He 0:08:08.760 --> 0:08:10.880 tried to have them shipped from the auction house in 0:08:10.920 --> 0:08:14.200 New York to London, which would have been a clear 0:08:14.280 --> 0:08:17.160 violation of trade sanctions, but it was actually the auction 0:08:17.160 --> 0:08:20.080 house that raised red flag in the first place. They 0:08:20.120 --> 0:08:23.120 went through their records and saw that the artworks had 0:08:23.120 --> 0:08:25.640 actually been purchased from under the name of a shell 0:08:25.720 --> 0:08:28.720 company which was linked to Derry Paska more than ten 0:08:28.800 --> 0:08:32.000 years ago. And they challenged Graham Bonham Carter around this, 0:08:32.240 --> 0:08:34.240 and he tried to push back. He said, just give 0:08:34.280 --> 0:08:36.000 me a little bit more time and I'll come up 0:08:36.000 --> 0:08:38.280 with some proof to show that it is mine. And 0:08:38.640 --> 0:08:41.600 he's my credit card statement showing that I'm paying for 0:08:41.600 --> 0:08:44.520 the shipping. But it just wasn't enough to convince the 0:08:44.559 --> 0:08:47.640 auction house that the artworks were in fact his, and 0:08:47.679 --> 0:08:50.760 they ended up reporting it to OSPAK, which is a 0:08:50.840 --> 0:08:53.240 part of the Treasury Department in the US that looks 0:08:53.280 --> 0:08:56.840 after the sanctions. So have all the major auction houses 0:08:56.960 --> 0:09:01.959 cooperated with subpoenas and quest for information. When I went 0:09:02.000 --> 0:09:04.800 to the auction houses last week as part of this reporting, 0:09:05.280 --> 0:09:07.760 most of them said that yes, we do corporate with 0:09:07.840 --> 0:09:10.760 law enforcement when they ask, and from what I heard 0:09:10.760 --> 0:09:13.280 from talking to different sources and the industry and legal 0:09:13.320 --> 0:09:16.440 sources as well, they do hand over the information when 0:09:16.520 --> 0:09:19.320 prosecutors are asking for it. It's not good for business 0:09:19.480 --> 0:09:22.920 to be violating trade sanctions. It comes with massive fines, 0:09:23.040 --> 0:09:25.280 and it was already a lot of attention on the 0:09:25.400 --> 0:09:28.520 art world. In particular, there was a Senate report in 0:09:28.679 --> 0:09:31.440 two thousand and twenty that looked at money laundering in 0:09:31.440 --> 0:09:35.040 the art world, and it highlighted a very high profile 0:09:35.080 --> 0:09:39.960 example where two brothers from Russia, the Rottenberg's, very wealthy individuals, 0:09:40.400 --> 0:09:43.679 managed to evade trade sanctions and purchase some pieces of 0:09:43.760 --> 0:09:47.959 artwork from US based auction houses by using a shell company. 0:09:48.280 --> 0:09:51.320 Ever since then that the industry has really made an 0:09:51.320 --> 0:09:55.000 effort to implement their own compliance programs, even though that 0:09:55.080 --> 0:09:58.440 it's not legislated by law, to try and make sure 0:09:58.960 --> 0:10:02.040 that won't happen again, and because it really gives some 0:10:02.160 --> 0:10:04.480 of parts of the industry and the auction houses a 0:10:04.520 --> 0:10:07.520 bad name, and they definitely don't want that. So eva 0:10:07.559 --> 0:10:12.080 despite the major auction houses implementing voluntary anti money laundering 0:10:12.120 --> 0:10:15.760 programs and even some including in contracts that the buyer 0:10:15.840 --> 0:10:19.920 or seller not be sanctioned or engaged in criminal activity, 0:10:20.480 --> 0:10:23.360 it still may not be enough to prevent the true 0:10:23.400 --> 0:10:28.040 owners of artworks from shielding themselves behind these webs of 0:10:28.120 --> 0:10:33.559 corporate structures or relatives exactly, and there's not a huge 0:10:34.000 --> 0:10:38.560 legal requirements on auction houses to dig very deep to 0:10:38.640 --> 0:10:41.840 try and figure out who the ultimate beneficial owner of 0:10:41.840 --> 0:10:45.199 an artwork is. One of the big debates that were 0:10:45.200 --> 0:10:50.440 sparked by report was whether the art industry should be 0:10:50.640 --> 0:10:55.040 subject to the same banking and financial regulation requirements as 0:10:55.200 --> 0:10:57.760 the rest of the financial industry. So that would be 0:10:57.800 --> 0:11:00.200 the same as some of the big banks and the 0:11:00.360 --> 0:11:04.280 art industry. Different auction houses private sellers would have to 0:11:04.280 --> 0:11:10.319 create money laundering programs which are very time intensive, cost intensive, 0:11:10.720 --> 0:11:13.040 and it would impose a lot especially on some of 0:11:13.040 --> 0:11:16.280 those smaller sellers which don't have the same resources as 0:11:16.320 --> 0:11:20.320 the big financial institutions. That hasn't happened yet, so you know, 0:11:20.559 --> 0:11:23.280 some of the big auction houses say that they make 0:11:24.000 --> 0:11:26.640 a concerted effort to try and figure out who the 0:11:26.720 --> 0:11:30.040 ultimate beneficial lineries of the piece of artwork, To go 0:11:30.240 --> 0:11:33.040 and figure out who owns the company that pursues in 0:11:33.080 --> 0:11:35.800 the artwork. They don't want to miss any red flags. 0:11:35.800 --> 0:11:39.319 But they're doing that voluntarily. It's not a legal requirement, 0:11:39.480 --> 0:11:42.280 so there are still some details that can fall through 0:11:42.320 --> 0:11:44.760 the cracks. I spoke to one attorney who put it 0:11:45.160 --> 0:11:47.960 very accurately when he said, it's not like Putain's banker 0:11:48.120 --> 0:11:51.080 is going to walk into an art gallery on Madison 0:11:51.120 --> 0:11:54.880 Avenue and by a percsper Is there any estimate about 0:11:54.920 --> 0:11:58.480 how many millions or tens of millions or hundreds of 0:11:58.520 --> 0:12:02.240 millions of dollars of art work are involved. That's a 0:12:02.280 --> 0:12:05.360 really good question, not that I've seen, to be honest, 0:12:05.400 --> 0:12:08.160 from the interviews that I did from this reporting, it 0:12:08.280 --> 0:12:11.760 seemed as if prosecutors were sort of just starting to 0:12:11.800 --> 0:12:15.120 figure out who owned what, and they were starting to 0:12:15.240 --> 0:12:17.880 name different pieces of artwork and different scupoenas they were 0:12:17.920 --> 0:12:20.720 setting to the auction houses so they might start to 0:12:20.760 --> 0:12:24.080 get a better picture, I guess of how much artwork 0:12:24.360 --> 0:12:27.200 is left in the US that is actually owned by 0:12:27.240 --> 0:12:30.280 some of these sanctioned individuals. Just reminds me in some 0:12:30.360 --> 0:12:34.840 ways of the monuments men who tracked down Nazi stolen 0:12:34.960 --> 0:12:38.640 art in World War Two. And it's interesting this same U. S. 0:12:38.679 --> 0:12:41.360 Attorney's Office in the Southern District of New York has 0:12:41.360 --> 0:12:46.360 had a few successful investigations in seizing artwork that was 0:12:46.400 --> 0:12:50.920 stolen by the Nazis two and they've used the same 0:12:51.080 --> 0:12:53.480 proceedings and sort of the same approach I guess in 0:12:53.559 --> 0:12:56.960 these cases civil asset forfeiture. Sort of interesting to see 0:12:56.960 --> 0:12:59.480 whether they have the same results. Here. There is one 0:13:00.040 --> 0:13:02.640 interesting example when you asked me about whether they're looking 0:13:02.640 --> 0:13:05.400 at money laundering. One of the individuals who was named 0:13:05.400 --> 0:13:09.280 in the subpoenas was Roman and Bromovich, who's one of 0:13:09.320 --> 0:13:12.160 the more well known Russian oligarchs who used to own 0:13:12.640 --> 0:13:16.000 the football team in Chelsea. He's actually not sanctioned in 0:13:16.040 --> 0:13:18.880 the US, unlike the others who are named the subpoenas, 0:13:18.960 --> 0:13:22.280 and Bromovich is sanctioned in the UK, which I thought 0:13:22.360 --> 0:13:26.480 was interesting because it wouldn't be as simple as looking 0:13:26.520 --> 0:13:29.320 at him the trade sanctions violations in the US. And 0:13:29.360 --> 0:13:31.800 when I asked a few different attorneys about these and 0:13:31.800 --> 0:13:34.720 who practiced in this space, they said that because he 0:13:34.880 --> 0:13:37.920 is sanctioned in the UK, prosecutors could be looking at 0:13:37.920 --> 0:13:41.360 whether he is trying to get around those sanctions and 0:13:41.520 --> 0:13:44.800 use the US financial system, which would be through a 0:13:44.800 --> 0:13:47.640 form of money laundering. So I think that's a pretty 0:13:47.720 --> 0:13:51.679 key example as well. That's how prosecutors are looking at 0:13:51.720 --> 0:13:55.840 trade sanctions violations as a whole money laundering definitely comes 0:13:55.920 --> 0:13:58.080 under that. It's a great story. I know a lot 0:13:58.160 --> 0:14:00.880 of research went into it. Thanks so much, Ava. That's 0:14:00.920 --> 0:14:06.520 Bloomberg Legal reporter Ava Benny Morrison. Elon Musk is building 0:14:06.559 --> 0:14:10.040 on his teflon Elon Street cred winning a case in 0:14:10.080 --> 0:14:12.959 which it seemed like the odds were stacked against him. 0:14:13.120 --> 0:14:16.719 Investors claimed that Musk defraunded them when he tweeted four 0:14:16.760 --> 0:14:19.640 and a half years ago that he was considering taking 0:14:19.680 --> 0:14:23.760 Tesla private and had funding secured to make the deal happen. 0:14:24.360 --> 0:14:27.560 It was a risky trial that many high profile executives 0:14:27.560 --> 0:14:30.600 would have avoided by reaching an out of court settlement, 0:14:30.960 --> 0:14:33.720 and Musk could have been on the hook for billions, 0:14:33.720 --> 0:14:37.520 but he escaped unscathed. After a three week trial in 0:14:37.560 --> 0:14:40.920 which Musk was the star witness, the jury found after 0:14:41.040 --> 0:14:44.600 just two hours of deliberations that he was not liable 0:14:44.640 --> 0:14:48.760 for investors losses. My guest is business law expert Eric Tallely, 0:14:48.880 --> 0:14:52.240 a professor at Columbia Law School. A jury in San 0:14:52.280 --> 0:14:57.560 Francisco took just two hours to clear Musk, despite the 0:14:57.640 --> 0:15:01.640 judge having decided that the funding secured tweet was false, 0:15:02.120 --> 0:15:07.480 despite testimony showing that Musk bankers had barely been consulted, 0:15:07.880 --> 0:15:10.760 and even a week after the treat they were still 0:15:10.800 --> 0:15:13.240 working out how the deal would be structured and who 0:15:13.240 --> 0:15:16.440 would pay for it. So Musk got away from a 0:15:16.520 --> 0:15:20.120 jury verdict against him. Again, maybe you got away with it, 0:15:20.160 --> 0:15:22.760 but I realized that there is definitely a set of 0:15:22.800 --> 0:15:25.320 ground rules to bring one of these simple suits. You 0:15:25.400 --> 0:15:29.080 can't just rest on your laurels with a you know, 0:15:29.160 --> 0:15:32.600 definitely a beneficial for the plaintiffs finding that thes this 0:15:32.720 --> 0:15:36.000 was a false and inaccurate tweet that he said there 0:15:36.040 --> 0:15:38.040 are more ingredients, and that's what the plaintiffs we're going 0:15:38.080 --> 0:15:41.680 to have to contend with here. There are probably two 0:15:41.720 --> 0:15:46.680 major issues that contributed to the outcome, and possibly some more, 0:15:46.720 --> 0:15:48.680 but you know, one of them I think was just 0:15:48.800 --> 0:15:52.920 that there really was a sense that the jury kind 0:15:52.920 --> 0:15:56.640 of had to, you know, figure out the compared to 0:15:56.720 --> 0:15:59.880 what story right, If Musk's tweet the funding was secured 0:16:00.480 --> 0:16:04.800 was incorrect, well, what would it have looked like had 0:16:04.840 --> 0:16:08.280 it been absolutely correct? And there it seems to me 0:16:08.400 --> 0:16:10.840 his his legal team did a good job of saying, 0:16:10.920 --> 0:16:14.440 you know, at the time, everyone thought Elon Musk could 0:16:14.440 --> 0:16:18.000 move mountains. So even if he had tweeded out funding 0:16:18.440 --> 0:16:20.760 kind of close to secured, and I'm still working out 0:16:20.760 --> 0:16:22.520 some of the details, but I'm pretty sure this is 0:16:22.560 --> 0:16:26.160 going to happen. Maybe at the time, that kind of 0:16:26.280 --> 0:16:28.920 is taken by just about everyone as being the rough 0:16:28.920 --> 0:16:33.120 equivalent of funding secured, and that mattered, and matters generally 0:16:33.240 --> 0:16:37.360 for defendants because if the nature of the misstatement, even 0:16:37.400 --> 0:16:40.400 if it was clearly a misstatement, if the nature of 0:16:40.440 --> 0:16:44.200 it isn't big enough to be really, really material or 0:16:44.200 --> 0:16:48.360 to have caused any any losses, the market reaction would 0:16:48.360 --> 0:16:51.600 have been exactly the same even if he had said 0:16:52.120 --> 0:16:56.040 accurately where he was in this process. That is a 0:16:56.320 --> 0:17:01.800 definitely ironclad defense to a securities lawsuit, and that seems 0:17:01.840 --> 0:17:04.800 to be something that the defense did very effectively here. 0:17:04.960 --> 0:17:07.640 The second factor has to do a little bit with 0:17:07.960 --> 0:17:12.000 um how you present facts to a jury. This was 0:17:12.080 --> 0:17:15.359 never going to be the easiest lift for the plaintiff 0:17:15.359 --> 0:17:18.639 class in this case, in large part because it not 0:17:18.720 --> 0:17:23.480 only involved getting to understand how these relatively complex securities 0:17:23.480 --> 0:17:27.760 markets work, but also different plaintiffs that were part of 0:17:27.760 --> 0:17:31.200 the plaintiff class. They had different positions in the stocks, 0:17:31.280 --> 0:17:33.760 some of them, you know, we're buying the underlying stock. 0:17:33.840 --> 0:17:38.080 Some of them had options positions, those themselves can be 0:17:38.200 --> 0:17:41.920 horribly complex to try to work through, and the approach 0:17:41.960 --> 0:17:46.400 in this case was to handle both liability and remedy 0:17:46.600 --> 0:17:49.840 at the same time. So the sheet that the jury 0:17:49.920 --> 0:17:52.719 was given on remedy almost looked like a math like 0:17:52.760 --> 0:17:55.399 a high school math test, and they had to, you know, 0:17:55.480 --> 0:17:57.800 go through month by months to try to figure out 0:17:57.800 --> 0:18:00.560 how much that our day by day that the stock 0:18:00.600 --> 0:18:04.040 of overpriced and so forth. And there's one quick way 0:18:04.040 --> 0:18:06.000 to not have to do any of that math, which 0:18:06.080 --> 0:18:08.560 is to say, I don't think the plaintiffs made their 0:18:08.600 --> 0:18:11.960 case on the basis of liability, and therefore filling out 0:18:12.000 --> 0:18:15.200 the rest of the math quiz is not necessary. That's 0:18:15.240 --> 0:18:17.919 always a challenge in these cases. It's probably you know, 0:18:17.960 --> 0:18:21.159 the big Roulette wheel spin of what's going to happen 0:18:21.160 --> 0:18:23.639 in a damages phase of the trial is something that 0:18:23.680 --> 0:18:26.600 both sides find hard to predict. And so this was 0:18:26.640 --> 0:18:29.200 one of these cases where we just didn't see that 0:18:29.440 --> 0:18:32.879 many cases that go all the way to litigation. This jury, 0:18:33.200 --> 0:18:36.280 you know, felt evidently comfortable enough in their conclusion that 0:18:36.359 --> 0:18:40.160 there just hadn't been enough in there to show liability 0:18:40.600 --> 0:18:43.280 that they were able to conclude, much to their relief, 0:18:43.359 --> 0:18:46.080 no doubt that they didn't have to then start engaging 0:18:46.080 --> 0:18:49.639 in computations related to damages. So the format of the 0:18:49.720 --> 0:18:54.640 jury said the case against Musk was disorganized, he wasn't 0:18:54.680 --> 0:18:57.600 sure what the plaintiffs were driving at, and the lawsuits 0:18:57.640 --> 0:19:00.840 seemed to be relying on just the tweets. He said 0:19:00.920 --> 0:19:04.639 that Musk's lawyers did a better job of showing that 0:19:04.840 --> 0:19:07.560 Musk was presenting what he believed to be true and 0:19:07.680 --> 0:19:11.560 was acting as a genuine bidder for the going private transaction. 0:19:11.800 --> 0:19:15.400 Did Musk just mesmerize the jury? I think there's probably 0:19:15.480 --> 0:19:19.320 always a possibility that Musk has mesmerized someone in a 0:19:19.400 --> 0:19:23.000 jury pool or a general investing public. He still has 0:19:23.080 --> 0:19:27.359 some of that gravity defying power that Bloom is definitely 0:19:27.359 --> 0:19:30.280 at least partially off the rows. Over the last six months, 0:19:30.280 --> 0:19:34.120 and in fact, Musk's team themselves had moved to try 0:19:34.160 --> 0:19:37.000 to relocate the trial to Texas under the theory that 0:19:37.040 --> 0:19:39.720 he couldn't get a fair trial in the Bear That 0:19:39.840 --> 0:19:42.320 never happened. Um, But you know, I think that was 0:19:42.400 --> 0:19:45.520 in part an acknowledgement of the fact that the number 0:19:45.560 --> 0:19:48.040 of folks out there that are willing to, you know, 0:19:48.080 --> 0:19:51.679 effectively take it on faith whenever Elon Musk utters something 0:19:52.359 --> 0:19:55.880 has gone down. That having been said, I do think 0:19:55.880 --> 0:19:58.359 that the defense did a good job of, um, you know, 0:19:58.400 --> 0:20:00.960 trying to make sure the jury trans order themselves back 0:20:01.000 --> 0:20:04.480 to two thousand eighteen, where Elon must still had an 0:20:04.520 --> 0:20:09.520 almost an unalloyed mythical, you know, sort of aura around him, 0:20:09.680 --> 0:20:12.840 and that has more of the ability to move markets 0:20:12.880 --> 0:20:16.600 even if you're not, you know, saying things with great 0:20:16.600 --> 0:20:20.240 certainty like funding secured. And I think that the defense 0:20:20.680 --> 0:20:23.679 did a good job of taking apart the different ingredients 0:20:23.720 --> 0:20:26.359 that have to go in to a civil claim for 0:20:26.400 --> 0:20:30.480 security spraud, finding a couple of those in which it's 0:20:30.520 --> 0:20:33.640 not really clear that he was acting, you know, from 0:20:33.640 --> 0:20:36.720 a desire to mislead people, and in fact, you could 0:20:36.760 --> 0:20:39.840 tell a story as Musk himself did understand, but you know, 0:20:39.880 --> 0:20:41.920 he was just trying to keep people informed of what 0:20:42.000 --> 0:20:44.639 was going on, and may have in artfully chosen a 0:20:44.640 --> 0:20:48.280 few words, but the gist of his of his message, 0:20:48.280 --> 0:20:51.520 at least according to him, was truthful. And so you know, 0:20:51.680 --> 0:20:55.040 it's usually the case in a lot of these business 0:20:55.040 --> 0:20:59.639 litigation matters that there are multiple parts of a cause 0:20:59.680 --> 0:21:02.400 of act action that defendants, if they kind of make 0:21:02.440 --> 0:21:05.200 the world look complex, they have more of a chance 0:21:05.200 --> 0:21:07.520 of winning on one or two of those elements and 0:21:07.560 --> 0:21:10.040 all if all of them are required, that's gonna be 0:21:10.080 --> 0:21:12.760 bad news for the plaintiffs. And so the defense kind 0:21:12.760 --> 0:21:16.080 of has that built in advantage here. That advantage was 0:21:16.200 --> 0:21:20.000 somewhat depleted because of the prior ruling on the falsity 0:21:20.040 --> 0:21:22.680 of the statement, but the defendant, you know, still kind 0:21:22.680 --> 0:21:24.560 of had a position of saying, look, all we have 0:21:24.600 --> 0:21:28.680 to do is win on one of these issues materiality, loss, causation, 0:21:29.000 --> 0:21:31.840 and the entire case of the plaintiffs is sunk. And 0:21:32.119 --> 0:21:34.960 they did a pretty effective job of doing that. The plaintifts, 0:21:34.960 --> 0:21:37.879 in contrast, their effort is really going to be this 0:21:37.960 --> 0:21:40.159 is a really really simple case. This is easy to 0:21:40.200 --> 0:21:44.520 boil down. You know, this is not complicated. This doesn't 0:21:44.520 --> 0:21:48.760 require the jury members to do you know, double reverse, 0:21:48.960 --> 0:21:51.080 you know, flipping twists in the air to figure out 0:21:51.119 --> 0:21:54.200 what was going on. And there, you know, there's gonna 0:21:54.200 --> 0:21:57.480 be a huge premium on putting on a very linear, 0:21:57.640 --> 0:22:01.119 easy to understand case and out of the box. The 0:22:01.359 --> 0:22:04.160 plaintiffs in this case the theory was a little bit 0:22:04.200 --> 0:22:07.639 more circuitous to try to get to what the wrong was, 0:22:07.760 --> 0:22:11.159 and and that can matter particularly, you know what, the 0:22:11.240 --> 0:22:13.919 jury of your first couple of witnesses kind of you know, 0:22:14.000 --> 0:22:15.960 send them on a wild goose chase. There's just not 0:22:16.080 --> 0:22:19.520 a second chance to make a first impression. His lawyer, 0:22:19.680 --> 0:22:25.320 Alex Spireau, also want a defamation lawsuit against Musk over 0:22:25.400 --> 0:22:29.359 his tweet calling a cave explorer a pedo guy. Is 0:22:29.359 --> 0:22:32.840 this a case of a lawyer who gets elon Musk 0:22:32.920 --> 0:22:35.600 and knows how to present him to a jury so 0:22:35.680 --> 0:22:39.800 they get him. Yes, maybe, um, but remember Mr Spirow 0:22:39.840 --> 0:22:43.360 also was representing Mr Musk in the Twitter acquisition that 0:22:43.800 --> 0:22:48.399 ended up settling with essentially a complete capitulation from Mr Musk. 0:22:48.840 --> 0:22:51.760 So you know, in both of these cases, they've you know, 0:22:51.800 --> 0:22:55.680 they've sort of fought it out to a successful resolution. 0:22:56.280 --> 0:22:58.160 But you know, I think it seems to most people 0:22:58.200 --> 0:23:00.959 that the fight against having to close the deal on 0:23:01.000 --> 0:23:05.359 Twitter was largely a white flag operation by Team Musk, 0:23:05.440 --> 0:23:08.080 or at least eventually became one. But you know, listen, 0:23:08.200 --> 0:23:11.120 the quality of lawyers that Mr Musk has is very high. 0:23:11.160 --> 0:23:14.200