1
00:00:03,200 --> 00:00:08,000
Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

2
00:00:11,200 --> 00:00:13,800
Speaker 2: As I've often said, it's a wild West and a

3
00:00:13,840 --> 00:00:15,440
Speaker 2: bunch of casino operators.

4
00:00:15,880 --> 00:00:19,159
Speaker 1: SEC chair Gary Gensler has made no secret of his

5
00:00:19,280 --> 00:00:23,720
Speaker 1: views on the crypto industry, repeatedly arguing that most tokens

6
00:00:23,760 --> 00:00:27,479
Speaker 1: are subject to his agency's oversight and that swaths of

7
00:00:27,520 --> 00:00:29,400
Speaker 1: the industry have been breaking the law.

8
00:00:30,040 --> 00:00:34,159
Speaker 2: In the crypto space, it's largely built on a business

9
00:00:34,200 --> 00:00:37,680
Speaker 2: model that's non compliant with the securities laws. People are

10
00:00:37,800 --> 00:00:41,640
Speaker 2: coe mingling all of the customer funds there. It would

11
00:00:41,680 --> 00:00:44,600
Speaker 2: be as if the New York Stock Exchange is also

12
00:00:44,760 --> 00:00:48,880
Speaker 2: operating a hedge fund and trading against their customers.

13
00:00:49,760 --> 00:00:52,479
Speaker 1: And now, in a one to two punch, the SEC

14
00:00:52,640 --> 00:00:56,760
Speaker 1: is cracking down on the shadowy industry that burned investors

15
00:00:56,800 --> 00:00:59,960
Speaker 1: with blow ups like the collapse of FTX last year,

16
00:01:00,520 --> 00:01:06,160
Speaker 1: suing its two biggest players, Binance, the world's largest cryptocurrency exchange,

17
00:01:06,319 --> 00:01:11,520
Speaker 1: and Coinbase Global, the largest US crypto exchange. CEO Brian

18
00:01:11,720 --> 00:01:16,120
Speaker 1: Armstrong says Coinbase has taken a compliance first approach and

19
00:01:16,240 --> 00:01:19,720
Speaker 1: in its complaint, the SEC has made no allegations of

20
00:01:19,800 --> 00:01:23,080
Speaker 1: misappropriation of customer funds or wash trading.

21
00:01:23,720 --> 00:01:27,560
Speaker 3: It's really debating this more technical legal question of are

22
00:01:27,600 --> 00:01:29,920
Speaker 3: some of these assets commodities or are these securities? And

23
00:01:30,920 --> 00:01:32,760
Speaker 3: I think that's something the court will have to decide

24
00:01:32,760 --> 00:01:35,200
Speaker 3: to sort of get some legal press, some case law

25
00:01:35,240 --> 00:01:38,039
Speaker 3: out there which will ultimately benefit us, because that's what

26
00:01:38,080 --> 00:01:40,160
Speaker 3: we've been asking the SEC for for a long time,

27
00:01:40,240 --> 00:01:42,760
Speaker 3: is how do we get more clarity? So if we

28
00:01:42,800 --> 00:01:44,880
Speaker 3: need to go to the course to do it, it's

29
00:01:44,920 --> 00:01:47,080
Speaker 3: not our first choice. We'd rather the regular had just

30
00:01:47,080 --> 00:01:48,280
Speaker 3: published a clearer rule book.

31
00:01:48,480 --> 00:01:51,800
Speaker 1: Joining me is securities law expert James Park, a professor

32
00:01:51,800 --> 00:01:56,720
Speaker 1: at UCLA Law School. Two lawsuits against major crypto exchange

33
00:01:56,760 --> 00:02:01,280
Speaker 1: is in two days. What's the message the SEA is sending?

34
00:02:01,880 --> 00:02:05,000
Speaker 4: So I think that they've been very deliberate and thoughtful

35
00:02:05,080 --> 00:02:08,280
Speaker 4: about bringing cases and building up the argument that they

36
00:02:08,320 --> 00:02:11,880
Speaker 4: should regulate the industry. And I think part of what

37
00:02:11,880 --> 00:02:15,440
Speaker 4: we're seeing here through enforcement is that the SEC is

38
00:02:15,520 --> 00:02:20,160
Speaker 4: essentially making the case that regulation is necessary, and they

39
00:02:20,200 --> 00:02:23,440
Speaker 4: are doing so in a way that is not too abrupt.

40
00:02:23,760 --> 00:02:27,840
Speaker 4: I mean, I think they're also capitalizing on the SPX crisis,

41
00:02:27,880 --> 00:02:31,799
Speaker 4: where we all see what can happen with an unregulated exchange,

42
00:02:32,000 --> 00:02:34,400
Speaker 4: and so I think the argument that exchanges should be

43
00:02:34,480 --> 00:02:37,960
Speaker 4: regulated and is going to fall in more sympathetic years.

44
00:02:38,000 --> 00:02:40,359
Speaker 4: And I think that's why we see this one two punch.

45
00:02:40,760 --> 00:02:43,160
Speaker 4: In these cases that the SEC has brought this week,

46
00:02:43,240 --> 00:02:46,400
Speaker 4: they're sending a very clear message that they are here

47
00:02:46,480 --> 00:02:49,160
Speaker 4: in the space and there is asserting their authority to

48
00:02:49,280 --> 00:02:52,360
Speaker 4: regulate cryptos. And I think that they're trying to strike

49
00:02:52,440 --> 00:02:54,360
Speaker 4: while the iron is hot.

50
00:02:54,560 --> 00:02:57,600
Speaker 1: Are these cases, the one against Finance and the one

51
00:02:57,639 --> 00:03:00,799
Speaker 1: against Coinbase? Are they similar in in some ways are

52
00:03:00,880 --> 00:03:01,880
Speaker 1: completely different?

53
00:03:02,440 --> 00:03:05,639
Speaker 4: There are some similarities. I would say the Binance case

54
00:03:05,760 --> 00:03:11,400
Speaker 4: involves some more serious allegations of market manipulation and permitting

55
00:03:11,440 --> 00:03:15,639
Speaker 4: market manipulation to happen. There's also an allegation in Binance

56
00:03:15,840 --> 00:03:20,960
Speaker 4: about commingling of funds and the concern that customer funds

57
00:03:20,960 --> 00:03:24,720
Speaker 4: that are deposited by US investors could be diverted by

58
00:03:25,000 --> 00:03:28,320
Speaker 4: the parent company and the founder. And I think this

59
00:03:28,520 --> 00:03:33,280
Speaker 4: clearly is meant to be analogous to what happened with FTX,

60
00:03:33,560 --> 00:03:37,320
Speaker 4: where customer funds were diverted and used to make vet

61
00:03:37,400 --> 00:03:40,800
Speaker 4: by an affiliated hedge fund. So I think the charges

62
00:03:40,800 --> 00:03:44,800
Speaker 4: against Finance are more serious although a smaller percentage of

63
00:03:44,840 --> 00:03:48,760
Speaker 4: Binance's operations are in the United States, and so the

64
00:03:48,800 --> 00:03:52,240
Speaker 4: significance of the coin Base case is that Coinbase is

65
00:03:52,320 --> 00:03:56,280
Speaker 4: primarily operating in the United States, but we don't have

66
00:03:56,760 --> 00:04:02,240
Speaker 4: the same allegations of market manipulation and problematic commingling. This

67
00:04:02,360 --> 00:04:05,840
Speaker 4: is really more of a basic argument that this is

68
00:04:05,880 --> 00:04:09,280
Speaker 4: a securities exchange that is subjects to regulation under the

69
00:04:09,320 --> 00:04:12,480
Speaker 4: Securities Exchange Act of nineteen thirty four, and that basic

70
00:04:12,560 --> 00:04:16,560
Speaker 4: argument is made with respect to both Finance and Coinbase.

71
00:04:16,839 --> 00:04:21,120
Speaker 1: The question of whether certain tokens are securities has hung

72
00:04:21,160 --> 00:04:25,320
Speaker 1: over the crypto industry for years, and SEC chair Gary

73
00:04:25,360 --> 00:04:30,520
Speaker 1: Gensler says most crypto products are no different from stocks, bonds,

74
00:04:30,560 --> 00:04:34,880
Speaker 1: and other securities, and the crypto businesses have to follow

75
00:04:34,920 --> 00:04:39,280
Speaker 1: the same rules as traditional stock and bond exchanges. Explain

76
00:04:39,320 --> 00:04:40,360
Speaker 1: what he's looking.

77
00:04:40,120 --> 00:04:42,720
Speaker 4: To do, you know, I think you can see a

78
00:04:42,720 --> 00:04:46,360
Speaker 4: little more elaboration about his position in the two complaints

79
00:04:46,400 --> 00:04:49,680
Speaker 4: that we saw filed by the SEC and Coinbase and Binance.

80
00:04:49,720 --> 00:04:52,560
Speaker 4: And one of the things that the complaints highlights is

81
00:04:52,600 --> 00:04:56,200
Speaker 4: that you know, if you go on to these websites

82
00:04:56,320 --> 00:05:00,760
Speaker 4: and purchase crypto, you know the interfaces in the distinguishable

83
00:05:00,880 --> 00:05:04,800
Speaker 4: from the website of Fidelity or Vanguard, where I'm buying

84
00:05:05,040 --> 00:05:07,560
Speaker 4: stocks or bonds, and so I think that is a

85
00:05:07,680 --> 00:05:12,760
Speaker 4: message they're trying to convey, is that fundamentally these assets

86
00:05:12,920 --> 00:05:18,320
Speaker 4: are just like security. They are valued based upon assessments

87
00:05:18,360 --> 00:05:22,840
Speaker 4: of the success of some underlying projects, some underlying business,

88
00:05:22,920 --> 00:05:27,400
Speaker 4: and very important for investors to get fair prices when

89
00:05:27,440 --> 00:05:30,520
Speaker 4: they're buying and selling these particular assets, and I think

90
00:05:30,520 --> 00:05:33,440
Speaker 4: that's a similar concern that we see in stock markets.

91
00:05:33,480 --> 00:05:37,000
Speaker 4: There's also the potential for manipulation. That's an allegation we

92
00:05:37,040 --> 00:05:41,679
Speaker 4: saw in Binance, where market participants can insuade the price

93
00:05:41,720 --> 00:05:46,520
Speaker 4: of the security through certain manipulative trading, meaning that investors

94
00:05:46,560 --> 00:05:49,120
Speaker 4: are not getting fair prices. So there is a similar

95
00:05:49,160 --> 00:05:54,400
Speaker 4: concern between stock markets and crypto assets markets. Now, I

96
00:05:54,400 --> 00:05:57,120
Speaker 4: think the limitation though. One of the questions I had

97
00:05:57,160 --> 00:05:59,599
Speaker 4: about both of these cases, and it's also a question

98
00:05:59,640 --> 00:06:05,720
Speaker 4: about Genstler's position, is that the SEC only identifies about

99
00:06:05,760 --> 00:06:10,400
Speaker 4: ten to fifteen crypto assets that it claims we're trading

100
00:06:10,440 --> 00:06:13,320
Speaker 4: on these exchanges, that it clearly makes the case that

101
00:06:13,400 --> 00:06:16,800
Speaker 4: they were securities under the so called Howie test, which

102
00:06:16,880 --> 00:06:20,120
Speaker 4: governs whether or not something is or is not a security,

103
00:06:20,160 --> 00:06:22,640
Speaker 4: and that's out of maybe two or three hundred different

104
00:06:22,680 --> 00:06:26,000
Speaker 4: crypto assets that are trading on these exchanges. And so

105
00:06:26,040 --> 00:06:28,520
Speaker 4: that to me since sort of an odd message where

106
00:06:28,600 --> 00:06:32,280
Speaker 4: Genstler is saying, you know, most or virtually all crypto

107
00:06:32,400 --> 00:06:35,719
Speaker 4: assets are securities, but then the case that they're filing,

108
00:06:35,760 --> 00:06:40,200
Speaker 4: they only identify a small percentage of the crypto assets

109
00:06:40,320 --> 00:06:43,680
Speaker 4: on these exchanges and make the case that they are securities. Now,

110
00:06:43,680 --> 00:06:46,080
Speaker 4: the SEC does say that at a minimum of you

111
00:06:46,279 --> 00:06:49,200
Speaker 4: ten to thirteen crypto assets that are trading on these

112
00:06:49,240 --> 00:06:52,320
Speaker 4: exchanges that are security, so there may be more, but

113
00:06:52,400 --> 00:06:54,560
Speaker 4: it seems a little bit odd to bring a case

114
00:06:54,600 --> 00:06:58,600
Speaker 4: where you're only identifying a small percentage of the crypto

115
00:06:58,720 --> 00:07:02,440
Speaker 4: assets on the exchanges when the chair is saying that

116
00:07:02,520 --> 00:07:05,280
Speaker 4: virtually all of these crypto ascids are securities.

117
00:07:05,680 --> 00:07:08,680
Speaker 1: On Bloomberg TV today there was an interview with coinbase

118
00:07:08,760 --> 00:07:12,120
Speaker 1: CEO Brian Armstrong, and he said that they had had

119
00:07:12,320 --> 00:07:16,040
Speaker 1: something like thirty meetings with the SEC over the last year.

120
00:07:16,920 --> 00:07:20,160
Speaker 1: They got no feedback and then they got the wills notice,

121
00:07:20,240 --> 00:07:22,840
Speaker 1: which tells you the SEC is going to bring an

122
00:07:22,920 --> 00:07:28,400
Speaker 1: enforcement action. I mean, should the SEC be providing these

123
00:07:28,440 --> 00:07:31,920
Speaker 1: companies with better guidance A great question.

124
00:07:32,360 --> 00:07:35,760
Speaker 4: I think the SEC's argument is that, you know, you

125
00:07:35,880 --> 00:07:40,600
Speaker 4: started up this exchange that has violated securities laws, and

126
00:07:40,640 --> 00:07:43,400
Speaker 4: it's operating, and now you come in and say you

127
00:07:43,440 --> 00:07:47,520
Speaker 4: want a register, right, Why should we accommodate you when

128
00:07:47,520 --> 00:07:50,320
Speaker 4: you didn't come to us before you started this business

129
00:07:50,480 --> 00:07:53,600
Speaker 4: which has billions and billions of dollars of transactions that

130
00:07:53,640 --> 00:07:57,400
Speaker 4: are happening, and many, according to the SEC, are clearly

131
00:07:57,440 --> 00:08:01,440
Speaker 4: in violation of securities laws, violate the law, and then

132
00:08:01,480 --> 00:08:03,880
Speaker 4: you come in and try to fix things. You know,

133
00:08:04,160 --> 00:08:06,120
Speaker 4: we should have some discretion as to what we do

134
00:08:06,200 --> 00:08:08,240
Speaker 4: in a situation like that. You know, we have no

135
00:08:08,320 --> 00:08:12,560
Speaker 4: obligation to accommodate you. We think we should bring enforcement

136
00:08:12,800 --> 00:08:17,320
Speaker 4: because you went ahead without asking us and created a

137
00:08:17,480 --> 00:08:21,360
Speaker 4: very very large business in this space that is violating

138
00:08:21,400 --> 00:08:24,720
Speaker 4: federal securities law. That is the position of the SEC.

139
00:08:25,040 --> 00:08:29,119
Speaker 4: I think Cooinbaso would say that that's not fair because

140
00:08:29,120 --> 00:08:33,280
Speaker 4: the law's unclear. We didn't know that there were these

141
00:08:33,400 --> 00:08:37,600
Speaker 4: ten or fifteen crypto assets that you consider to be securities,

142
00:08:37,679 --> 00:08:39,640
Speaker 4: or at least we believed in good faith they were

143
00:08:39,679 --> 00:08:43,160
Speaker 4: not securities. We've been trying to comply with the law,

144
00:08:43,760 --> 00:08:45,839
Speaker 4: and so we want to talk to you and get

145
00:08:45,880 --> 00:08:48,400
Speaker 4: some more parity about your position of what the law is.

146
00:08:48,720 --> 00:08:52,080
Speaker 4: The reason we moved forward without your permission is that

147
00:08:52,120 --> 00:08:56,280
Speaker 4: we sincerely believe that these assets were not securities, and

148
00:08:56,320 --> 00:08:58,520
Speaker 4: to the extent that you believe that they are securities,

149
00:08:58,559 --> 00:09:01,319
Speaker 4: you should give us a little bit of leeway in

150
00:09:01,400 --> 00:09:04,640
Speaker 4: finding a mutually agreeable solution. So I think there are

151
00:09:04,720 --> 00:09:08,439
Speaker 4: arguments on both sides as to the significance of these meetings.

152
00:09:08,720 --> 00:09:13,319
Speaker 1: The reaction by both coinbase and Binance has been similar

153
00:09:13,600 --> 00:09:18,040
Speaker 1: in that respect. Armstrong said the SEC under this chair

154
00:09:18,080 --> 00:09:22,280
Speaker 1: has created regulation by enforcement instead of creating a clear

155
00:09:22,400 --> 00:09:26,280
Speaker 1: rule book, and Binance said the lawsuit reflected the SEC's

156
00:09:26,559 --> 00:09:31,000
Speaker 1: misguided and conscious refusal to provide clarity to the crypto industry.

157
00:09:31,240 --> 00:09:34,160
Speaker 4: That's an argument that has been made for many decades.

158
00:09:34,480 --> 00:09:38,839
Speaker 4: It first appeared back in the nineteen seventies with investigations

159
00:09:38,880 --> 00:09:42,480
Speaker 4: relating to foreign bribes paid by public companies. The companies

160
00:09:42,559 --> 00:09:46,600
Speaker 4: argued that it was not clear that these bribes violated

161
00:09:46,640 --> 00:09:49,800
Speaker 4: securities law. The SEC brought a lot of enforcement cases,

162
00:09:49,840 --> 00:09:52,240
Speaker 4: and there were some criticisms that they were regulating through

163
00:09:52,320 --> 00:09:56,280
Speaker 4: prosecution or regulating from by enforcement. Now, I think the

164
00:09:56,320 --> 00:10:01,320
Speaker 4: SEC's defense in this situation is that, you know, these

165
00:10:01,600 --> 00:10:03,640
Speaker 4: are laws that are on the books, and they are

166
00:10:03,679 --> 00:10:07,920
Speaker 4: deliberately vague. They are deliberately vague because we don't want

167
00:10:07,960 --> 00:10:10,800
Speaker 4: to provide a roadmap to people who are committing fraud

168
00:10:11,040 --> 00:10:14,560
Speaker 4: as to how they can evade regulation. Congress made the

169
00:10:14,600 --> 00:10:18,080
Speaker 4: definition of a security deliberately vague because they understood there

170
00:10:18,120 --> 00:10:20,040
Speaker 4: are going to be a lot of things that people

171
00:10:20,080 --> 00:10:24,120
Speaker 4: would try to structure in order to avoid regulation through

172
00:10:24,160 --> 00:10:26,920
Speaker 4: the federal securities laws. And that's how the federal securities

173
00:10:26,960 --> 00:10:30,080
Speaker 4: laws are built, and so to some extent, some form

174
00:10:30,120 --> 00:10:33,640
Speaker 4: of regulation by enforcement is inevitable. I would also say

175
00:10:33,679 --> 00:10:38,080
Speaker 4: in the SEC's defense that the problem of crypto has

176
00:10:38,120 --> 00:10:41,520
Speaker 4: been extremely challenging because if you, you know, think about

177
00:10:41,559 --> 00:10:45,520
Speaker 4: the technology, you can create fifty billion crypto assets with

178
00:10:45,600 --> 00:10:50,240
Speaker 4: a single program and distribute it widely, almost instantaneously to

179
00:10:50,880 --> 00:10:54,360
Speaker 4: millions and millions of investors. This is a far different

180
00:10:54,360 --> 00:10:57,559
Speaker 4: world from the old stock schemes, where at least you'd

181
00:10:57,600 --> 00:11:00,600
Speaker 4: have to print out stock certificates and all people on

182
00:11:00,640 --> 00:11:04,480
Speaker 4: the phone. The speed and magnitude of the development of

183
00:11:04,520 --> 00:11:08,160
Speaker 4: crypto has been extraordinary, and I think the SEC has

184
00:11:08,480 --> 00:11:11,120
Speaker 4: been scrambling over the last five to six years as

185
00:11:11,120 --> 00:11:15,000
Speaker 4: to how they should respond with respect to the boom

186
00:11:15,200 --> 00:11:18,800
Speaker 4: in crypto assets. So I think that the industry has

187
00:11:18,840 --> 00:11:21,800
Speaker 4: a point to some extent that perhaps at times the

188
00:11:21,880 --> 00:11:24,360
Speaker 4: SEC has been a little bit clumsy in terms of

189
00:11:24,400 --> 00:11:27,680
Speaker 4: the message that it's sending. Maybe it's been a little

190
00:11:27,720 --> 00:11:31,960
Speaker 4: bit deliberately unclear in a certain way because it wants

191
00:11:32,040 --> 00:11:36,000
Speaker 4: to avoid being put into a box. The SEC's response is, well,

192
00:11:36,000 --> 00:11:38,800
Speaker 4: that's just how the security laws are structured. I mean,

193
00:11:38,800 --> 00:11:41,920
Speaker 4: we're just trying to understand the issue and problem, and

194
00:11:41,920 --> 00:11:44,400
Speaker 4: it takes time for us to do this, and that's

195
00:11:44,400 --> 00:11:46,480
Speaker 4: why we're not giving you clear answers. We're trying to

196
00:11:46,480 --> 00:11:48,960
Speaker 4: figure it out first, and we don't want to preclude

197
00:11:49,320 --> 00:11:53,440
Speaker 4: any regulation by taking premature positions that are not well

198
00:11:53,480 --> 00:11:54,360
Speaker 4: thought out.

199
00:11:54,720 --> 00:11:58,520
Speaker 1: Gensler has compared the crypto industry to the wild wild

200
00:11:58,559 --> 00:12:04,199
Speaker 1: West at pure exaggeration or is that true in many respects.

201
00:12:04,840 --> 00:12:08,559
Speaker 4: I think it is, and it's something to be concerned about.

202
00:12:09,200 --> 00:12:13,800
Speaker 4: And I think retail investors, you know, young people for examples,

203
00:12:13,880 --> 00:12:17,040
Speaker 4: are very sort of into these digital markets, and they're

204
00:12:17,080 --> 00:12:21,199
Speaker 4: on social media where these coins are being touted, and

205
00:12:21,440 --> 00:12:23,360
Speaker 4: there's a concern that a lot of money is going

206
00:12:23,400 --> 00:12:26,040
Speaker 4: to be lost to people who are essentially stealing it,

207
00:12:26,120 --> 00:12:29,400
Speaker 4: and that's not a good thing. And I think that

208
00:12:30,080 --> 00:12:34,240
Speaker 4: there has been a tendency by the industry to push

209
00:12:34,280 --> 00:12:38,440
Speaker 4: the boundaries, to push the boundaries of regulation, and I

210
00:12:38,480 --> 00:12:41,520
Speaker 4: think that the idea that it's sort of the wild West,

211
00:12:41,679 --> 00:12:43,040
Speaker 4: you know, it's an apt description.

212
00:12:43,559 --> 00:12:46,520
Speaker 1: Looking at these cases, do you think that they're hard

213
00:12:46,600 --> 00:12:48,839
Speaker 1: cases for the SEC to make?

214
00:12:49,440 --> 00:12:52,640
Speaker 4: There are challenges with both cases. In the finance case,

215
00:12:52,720 --> 00:12:56,320
Speaker 4: you have more problematic conduct, so that's in favor of

216
00:12:56,360 --> 00:12:59,400
Speaker 4: the SDC. On the other hand, only a portion of

217
00:12:59,440 --> 00:13:02,760
Speaker 4: finances operations are clearly in the United States, and so

218
00:13:02,760 --> 00:13:05,040
Speaker 4: there's kind of a question of the limits of the

219
00:13:05,200 --> 00:13:10,760
Speaker 4: SEC's jurisdiction and to what extent can they regulate operations

220
00:13:10,800 --> 00:13:14,720
Speaker 4: that are completely overseas. The SEC is making the argument

221
00:13:14,920 --> 00:13:19,320
Speaker 4: that these overseas operations clearly have an impact in the

222
00:13:19,440 --> 00:13:24,679
Speaker 4: US because they are basically soliciting US investors and encouraging

223
00:13:25,320 --> 00:13:29,640
Speaker 4: them to sign up for trading on foreign platforms, even

224
00:13:29,679 --> 00:13:32,640
Speaker 4: though the foreign platforms are not really supposed to have

225
00:13:32,800 --> 00:13:37,079
Speaker 4: US investors. There's some allegations that they're encouraging potential US

226
00:13:37,200 --> 00:13:41,199
Speaker 4: clients to log in with an Internet connection that doesn't

227
00:13:41,360 --> 00:13:44,720
Speaker 4: identify where you are logging in from in order to

228
00:13:45,080 --> 00:13:48,320
Speaker 4: allow that person to get through the various screens that

229
00:13:48,360 --> 00:13:51,400
Speaker 4: are meant to keep out US investors. So certainly there

230
00:13:51,480 --> 00:13:54,280
Speaker 4: is an argument that some of these other operations should

231
00:13:54,320 --> 00:13:57,200
Speaker 4: be subject to US jurisdiction, but I think that could

232
00:13:57,240 --> 00:14:01,280
Speaker 4: be a bit complicated to establish coin Base. I think

233
00:14:01,320 --> 00:14:04,920
Speaker 4: the challenge for the SDC is that, you know, they've

234
00:14:04,920 --> 00:14:09,240
Speaker 4: only identified about ten or so crypto assets that it

235
00:14:09,320 --> 00:14:13,440
Speaker 4: maintains are clearly securities, and so certainly Coinbase may try

236
00:14:13,440 --> 00:14:17,360
Speaker 4: to dispute in court that these crypto assets are actually

237
00:14:17,360 --> 00:14:20,200
Speaker 4: securities under the Howie test. They may dispute that the

238
00:14:20,320 --> 00:14:23,120
Speaker 4: sec may have to defend its position crypto asset by

239
00:14:23,120 --> 00:14:26,160
Speaker 4: crypto assets. And that's sort of the broader question of

240
00:14:26,160 --> 00:14:28,960
Speaker 4: what does the SDC want in the coin Base case.

241
00:14:29,040 --> 00:14:31,920
Speaker 4: Are they trying to say that Coinbase should be shut down?

242
00:14:32,520 --> 00:14:38,120
Speaker 4: Is there an alternative registration option that they think could proceed?

243
00:14:38,560 --> 00:14:42,000
Speaker 4: You know, could Coinbase argue, hey, we'll just stop allowing

244
00:14:42,320 --> 00:14:44,520
Speaker 4: training in these ten to fifteen things that you see

245
00:14:44,520 --> 00:14:47,360
Speaker 4: our security and if we do that, maybe we're not

246
00:14:47,440 --> 00:14:50,920
Speaker 4: an exchange and so we don't have to register going forward.

247
00:14:51,000 --> 00:14:53,400
Speaker 4: So I think that, you know, these are very carefully

248
00:14:53,440 --> 00:14:57,880
Speaker 4: thought through, thoroughly investigated cases, but there could be some

249
00:14:58,280 --> 00:15:01,560
Speaker 4: complications if these exchange decide to litigate.

250
00:15:01,640 --> 00:15:04,520
Speaker 1: In course, maybe you can make this clear. If there

251
00:15:04,520 --> 00:15:07,960
Speaker 1: are only those few in the coin Base case that

252
00:15:08,040 --> 00:15:11,920
Speaker 1: the SEC is asserting our securities, is this then not

253
00:15:12,320 --> 00:15:16,440
Speaker 1: an attempt by the SEC to assert its jurisdiction over

254
00:15:16,640 --> 00:15:17,880
Speaker 1: the crypto industry.

255
00:15:18,320 --> 00:15:22,040
Speaker 4: They are still saying, though, that your entire exchange has

256
00:15:22,120 --> 00:15:24,680
Speaker 4: to register with US, and so that's a little bit

257
00:15:24,720 --> 00:15:27,240
Speaker 4: puzzling to me. You know, I just read the complaints.

258
00:15:27,240 --> 00:15:29,200
Speaker 4: I haven't really had a lot of time to think

259
00:15:29,280 --> 00:15:33,080
Speaker 4: through the legal issues in doctrine, but that's something that

260
00:15:33,160 --> 00:15:35,960
Speaker 4: seems a bit odd to me, because you know, clearly

261
00:15:36,200 --> 00:15:40,520
Speaker 4: there are crypto assets trading on coinbase that are not securities.

262
00:15:40,680 --> 00:15:42,760
Speaker 4: You know, my understanding is about half of the trading

263
00:15:42,840 --> 00:15:46,600
Speaker 4: volume is bitcoin and ether, and the SEC has conceded

264
00:15:46,640 --> 00:15:49,400
Speaker 4: that those are not securities, and so there's kind of

265
00:15:49,440 --> 00:15:52,200
Speaker 4: this issue of, well, if only a portion of the

266
00:15:52,240 --> 00:15:56,000
Speaker 4: trading on your exchange relates to securities, should you have

267
00:15:56,120 --> 00:15:59,560
Speaker 4: to register with the SEC, and the SEC is saying, yes,

268
00:15:59,600 --> 00:16:03,440
Speaker 4: you do, and so I think they are asserting authority

269
00:16:03,480 --> 00:16:06,480
Speaker 4: over these exchanges. I think the question is whether or

270
00:16:06,560 --> 00:16:10,040
Speaker 4: not there may be some questions about the legality of that,

271
00:16:10,360 --> 00:16:13,600
Speaker 4: because you know, there might be intermediate solutions where you

272
00:16:13,600 --> 00:16:17,440
Speaker 4: could kind of jettison those crypto assets that are securities

273
00:16:17,640 --> 00:16:21,120
Speaker 4: and argue that you're outside of the SEC's jurisdiction. But

274
00:16:21,200 --> 00:16:24,240
Speaker 4: I think it's clear the SEC in the lawsuits they

275
00:16:24,280 --> 00:16:28,560
Speaker 4: do want to regulate coinbase and binance as stock exchanges

276
00:16:28,600 --> 00:16:29,720
Speaker 4: securities exchanges.

277
00:16:30,120 --> 00:16:33,840
Speaker 1: So if Congress doesn't act in this area, does that

278
00:16:33,920 --> 00:16:37,520
Speaker 1: mean the courts will be deciding what is a security

279
00:16:37,520 --> 00:16:38,200
Speaker 1: and what is not?

280
00:16:38,800 --> 00:16:41,160
Speaker 4: Yeah, they'll be deciding a couple things, right, They'll be

281
00:16:41,200 --> 00:16:45,120
Speaker 4: deciding case by case, are these crypto assets that the

282
00:16:45,200 --> 00:16:48,800
Speaker 4: SEC claims are securities are they actually securities? And then secondly,

283
00:16:48,800 --> 00:16:51,960
Speaker 4: they're going to decide the broader issue of when do

284
00:16:52,000 --> 00:16:56,440
Speaker 4: you have to register with the SEC as a securities exchange.

285
00:16:56,520 --> 00:16:58,720
Speaker 4: I think there are a couple of major legal issues

286
00:16:58,760 --> 00:17:02,320
Speaker 4: here that the court will look at if Congress does

287
00:17:02,360 --> 00:17:06,760
Speaker 4: not act and Coinbase and Binance decide to litigate these cases.

288
00:17:07,000 --> 00:17:11,200
Speaker 1: Some people say these lawsuits could transform the crypto market.

289
00:17:11,520 --> 00:17:12,720
Speaker 1: Do you think that's true.

290
00:17:12,960 --> 00:17:16,800
Speaker 4: I think they could. If the SEC wins, then I

291
00:17:16,840 --> 00:17:20,960
Speaker 4: think we're going to have a much more regulated crypto market.

292
00:17:21,320 --> 00:17:25,159
Speaker 4: When you register as an exchange, the SEC has oversight,

293
00:17:25,440 --> 00:17:29,160
Speaker 4: the power to shape the rules on the exchange and

294
00:17:29,280 --> 00:17:33,560
Speaker 4: their obligations on the exchange to look for market manipulation

295
00:17:33,720 --> 00:17:35,679
Speaker 4: in fraud. It's going to be much more of a

296
00:17:35,760 --> 00:17:39,399
Speaker 4: regulated industry. If the SDC succeeds, that may not be

297
00:17:39,480 --> 00:17:45,800
Speaker 4: such a bad thing for exchanges to comply with SDC oversights.

298
00:17:46,080 --> 00:17:49,560
Speaker 4: And you know, this is not unprecedented in that, you know,

299
00:17:49,600 --> 00:17:52,040
Speaker 4: you think about the New York Stock Exchange more than

300
00:17:52,040 --> 00:17:55,280
Speaker 4: one hundred years ago. It starts out as a private

301
00:17:55,560 --> 00:18:00,640
Speaker 4: association of individuals who are interested in making a more marketplace.

302
00:18:00,720 --> 00:18:04,720
Speaker 4: It becomes, you know, this great institution, a private institution,

303
00:18:05,119 --> 00:18:08,600
Speaker 4: and you have the federal government in the Securities Exchange

304
00:18:08,600 --> 00:18:12,919
Speaker 4: Act of nineteen thirty four, basically taking jurisdiction over this

305
00:18:13,119 --> 00:18:16,119
Speaker 4: private organization. And so we could have a similar dynamic

306
00:18:16,200 --> 00:18:19,679
Speaker 4: here in the crypto industry. And that you know, in

307
00:18:19,720 --> 00:18:21,800
Speaker 4: the long run, could that be a good thing for

308
00:18:21,880 --> 00:18:25,199
Speaker 4: crypto It might be it might be something that gives

309
00:18:25,200 --> 00:18:28,919
Speaker 4: the crypto markets a bit more legitimacy to the extent

310
00:18:28,960 --> 00:18:32,399
Speaker 4: that they are regulating. I don't envy the SPC and

311
00:18:32,720 --> 00:18:36,520
Speaker 4: sort of the difficulty of regulating this industry. So one

312
00:18:36,520 --> 00:18:38,920
Speaker 4: of the questions that may come up with these cases

313
00:18:39,000 --> 00:18:41,600
Speaker 4: is that these exchanges have been operating for some time.

314
00:18:41,920 --> 00:18:44,919
Speaker 4: You know, why didn't the SEC act sooner? And I

315
00:18:44,920 --> 00:18:47,800
Speaker 4: think the answer is if they had acted sooner, then

316
00:18:47,840 --> 00:18:50,880
Speaker 4: there would have been criticism of the SEC that there's

317
00:18:50,920 --> 00:18:54,680
Speaker 4: squelching entrepreneurship, there's squelching something that could be really, really good.

318
00:18:55,040 --> 00:18:57,720
Speaker 4: And so I think that they've been very deliberate and

319
00:18:57,840 --> 00:19:01,520
Speaker 4: thoughtful about bringing cases and building up the argument that

320
00:19:01,520 --> 00:19:07,080
Speaker 4: they should regulate the industry. The SEC is taking advantage

321
00:19:07,119 --> 00:19:11,880
Speaker 4: of what it believes is public perception that these crypto

322
00:19:11,920 --> 00:19:14,879
Speaker 4: exchanges are problematic, and I think this comes out of

323
00:19:14,920 --> 00:19:17,960
Speaker 4: the FTX collapse, and I think they're sending a message

324
00:19:17,960 --> 00:19:22,320
Speaker 4: that they are going to regulate the space fairly heavily.

325
00:19:22,560 --> 00:19:25,560
Speaker 4: And I think that they think that public perception is

326
00:19:25,600 --> 00:19:29,760
Speaker 4: skeptical about the value of crypto and is very wary

327
00:19:29,840 --> 00:19:33,440
Speaker 4: of the potential for fraud and manipulation at these exchanges.

328
00:19:33,480 --> 00:19:35,840
Speaker 4: So I think they're sending a very clear message that

329
00:19:35,880 --> 00:19:37,600
Speaker 4: they are here in the space.

330
00:19:37,880 --> 00:19:40,680
Speaker 1: It'll be interesting to see where these two cases go.

331
00:19:41,080 --> 00:19:44,680
Speaker 1: Thanks so much, Jim Best, Professor James Park of UCLA

332
00:19:44,800 --> 00:19:51,520
Speaker 1: Law School. Revelations about Justice Clarence Thomas's real estate transactions

333
00:19:51,520 --> 00:19:56,040
Speaker 1: and undisclosed luxury trips paid for by his billionaire friend

334
00:19:56,119 --> 00:20:00,080
Speaker 1: and GOP donor Harlan crow have fueld debate about the

335
00:20:00,160 --> 00:20:03,280
Speaker 1: conduct and ethics of the justices and the lack of

336
00:20:03,400 --> 00:20:07,119
Speaker 1: oversight over the highest court in the land. A Bloomberg

337
00:20:07,160 --> 00:20:10,840
Speaker 1: review of ethics policies across the federal government shows that

338
00:20:10,920 --> 00:20:14,360
Speaker 1: the other two million federal workers would face a harder

339
00:20:14,400 --> 00:20:18,720
Speaker 1: time accepting gifts far smaller than those bestowed on Thomas.

340
00:20:19,080 --> 00:20:22,560
Speaker 1: Joining me is Bloomberg Legal reporter David Voriakis, who's been

341
00:20:22,600 --> 00:20:28,399
Speaker 1: looking into this, start by refreshing our recollections about Justice

342
00:20:28,440 --> 00:20:32,840
Speaker 1: Thomas's failure to report travel and other perks what was revealed.

343
00:20:33,440 --> 00:20:40,720
Speaker 5: Pro Publica reported that Justice Thomas accepted several luxury gifts

344
00:20:40,720 --> 00:20:45,880
Speaker 5: and perks from his billionaire friend Harlan Crowe. They included

345
00:20:46,400 --> 00:20:52,480
Speaker 5: private jet travel to go on a vacation on Crowe's yacht,

346
00:20:52,840 --> 00:20:58,480
Speaker 5: and they also included buying the home where his mother

347
00:20:58,600 --> 00:21:03,800
Speaker 5: lives and still lives. And these gusts were not reported

348
00:21:03,840 --> 00:21:09,119
Speaker 5: by Clarence Thomas, and that's caused quite a controversy about

349
00:21:09,200 --> 00:21:12,159
Speaker 5: whether they should have been reported. He said that he

350
00:21:12,240 --> 00:21:16,320
Speaker 5: did not need to report them because they were excluded

351
00:21:16,600 --> 00:21:22,760
Speaker 5: under federal ethics regulations by the friendship exception that if

352
00:21:22,880 --> 00:21:25,879
Speaker 5: this is a friend of his, that he did not

353
00:21:26,160 --> 00:21:31,600
Speaker 5: have to report it. And Harlan Crowe has described a

354
00:21:31,760 --> 00:21:36,560
Speaker 5: close personal friendship with Clarence Thomas. What made the pro

355
00:21:36,600 --> 00:21:41,080
Speaker 5: public A reporting so powerful was the extent to which

356
00:21:41,320 --> 00:21:45,840
Speaker 5: they had a very close friendship and the lavishness of

357
00:21:45,880 --> 00:21:49,320
Speaker 5: the gifts that Harlan Crowe gave to Justice Thomas.

358
00:21:50,359 --> 00:21:54,160
Speaker 1: So what's the rule for most federal employees as far

359
00:21:54,240 --> 00:21:56,520
Speaker 1: as gifts are concerned or perks?

360
00:21:58,080 --> 00:22:03,479
Speaker 5: Most federal employees are not allowed to accept gifts above

361
00:22:03,720 --> 00:22:11,080
Speaker 5: a very modest level. In most cases, they are supposed

362
00:22:11,080 --> 00:22:15,920
Speaker 5: to refuse those gifts, particularly if they're from someone outside

363
00:22:16,000 --> 00:22:20,000
Speaker 5: the government, if they're from someone that they may have

364
00:22:20,040 --> 00:22:24,240
Speaker 5: a matter pending before them. And there is a certain

365
00:22:24,280 --> 00:22:29,280
Speaker 5: gift threshold level beyond which many thousands of employees are

366
00:22:29,280 --> 00:22:33,280
Speaker 5: supposed to disclose those gifts. I would say that across

367
00:22:33,320 --> 00:22:37,960
Speaker 5: the government, in the legislative branch, in Congress, in the

368
00:22:38,040 --> 00:22:42,639
Speaker 5: executive branch, which is nearly two million employees, and in

369
00:22:42,680 --> 00:22:48,040
Speaker 5: the judiciary, there is this so called friendship exception, which

370
00:22:48,160 --> 00:22:52,639
Speaker 5: is that if you have a personal friend or a

371
00:22:52,720 --> 00:22:56,040
Speaker 5: relative who gives you a gift, that is an exception.

372
00:22:56,240 --> 00:22:59,960
Speaker 5: There are other exceptions as well. And what we report

373
00:23:00,119 --> 00:23:05,639
Speaker 5: did was that in many instances, gifts or other types

374
00:23:05,680 --> 00:23:10,639
Speaker 5: of ethical dilemmas that may arise for federal workers go

375
00:23:10,840 --> 00:23:17,320
Speaker 5: before ethics officers who are following and interpreting the nineteen

376
00:23:17,400 --> 00:23:21,560
Speaker 5: seventy eight Ethics and Government Act and later legislation and

377
00:23:21,680 --> 00:23:26,000
Speaker 5: regulation that flowed from that. And that's the legislation that

378
00:23:26,160 --> 00:23:31,320
Speaker 5: essentially determines what sort of gifts, what sort of travel,

379
00:23:31,840 --> 00:23:36,600
Speaker 5: what sort of recusals or conflicts of interest, what sort

380
00:23:36,600 --> 00:23:41,919
Speaker 5: of post employment opportunities people can accept. And for the

381
00:23:42,040 --> 00:23:46,640
Speaker 5: vast majority of the federal workforce, they understand that those

382
00:23:46,720 --> 00:23:49,600
Speaker 5: rules are in place and that they need to go

383
00:23:49,680 --> 00:23:55,000
Speaker 5: through ethics officers in cases that you know, maybe or

384
00:23:55,119 --> 00:23:58,439
Speaker 5: close calls or where the regulations need to be interpreted.

385
00:23:58,720 --> 00:24:03,840
Speaker 5: What's different with Justice Thomas is while the Chief Justice

386
00:24:03,920 --> 00:24:09,000
Speaker 5: John Roberts says that the nine Supreme Court justices follow

387
00:24:09,359 --> 00:24:12,560
Speaker 5: the rules that are in place for the federal judiciary,

388
00:24:12,920 --> 00:24:17,400
Speaker 5: there is no outside oversight of the Supreme Court and

389
00:24:17,560 --> 00:24:21,960
Speaker 5: how those rules should be interpreted for the nine justices,

390
00:24:22,359 --> 00:24:25,120
Speaker 5: and so that's caused a lot of controversy and obviously

391
00:24:25,119 --> 00:24:28,560
Speaker 5: of pushing Congress to try to reform that, and there's

392
00:24:28,600 --> 00:24:33,240
Speaker 5: been a subsequent pushback by Chief Justice Roberts, who essentially

393
00:24:33,320 --> 00:24:36,480
Speaker 5: says that they adhere the highest standards of conduct.

394
00:24:37,240 --> 00:24:40,400
Speaker 1: Thomas maintains he didn't have to disclose the luxuried trips

395
00:24:40,440 --> 00:24:44,760
Speaker 1: because Crowe's a close friend, but for everyone, don't gifts

396
00:24:44,840 --> 00:24:47,360
Speaker 1: totaling over four hundred and fifty dollars in one year

397
00:24:47,400 --> 00:24:51,320
Speaker 1: from a single source, including friends, have to be disclosed.

398
00:24:51,640 --> 00:24:55,199
Speaker 5: They do, And there are tens of thousands of federal

399
00:24:55,240 --> 00:24:59,399
Speaker 5: employees who need to make annual financial disclosures, as do

400
00:24:59,480 --> 00:25:03,119
Speaker 5: Thesereme Court justices and all the district judge and of

401
00:25:03,240 --> 00:25:08,320
Speaker 5: Pella judges and members of Congress and senior executive branch employees,

402
00:25:08,640 --> 00:25:12,640
Speaker 5: so they would have to disclose those on their financial forms.

403
00:25:12,840 --> 00:25:16,639
Speaker 5: The difference with Supreme Court justices, is they don't have

404
00:25:16,760 --> 00:25:20,800
Speaker 5: to go to an ethics official in their branch of

405
00:25:20,920 --> 00:25:26,480
Speaker 5: government for permission. For instance, with Congress, which generally has

406
00:25:26,720 --> 00:25:31,240
Speaker 5: more permissive ethics rules, because the notion is we want

407
00:25:31,440 --> 00:25:35,399
Speaker 5: our legislators to be out in the community and meeting people.

408
00:25:35,800 --> 00:25:40,199
Speaker 5: They need advance approval for many types of trips and

409
00:25:40,359 --> 00:25:44,840
Speaker 5: gifts and honur area. And that's also the case in

410
00:25:44,880 --> 00:25:51,000
Speaker 5: the executive branch, that they need advanced approval for various

411
00:25:51,200 --> 00:25:55,840
Speaker 5: types of gifts and travel. With the judiciary, it's largely

412
00:25:56,200 --> 00:26:02,080
Speaker 5: on them to decide do they need to disclose financial conflicts,

413
00:26:02,600 --> 00:26:06,000
Speaker 5: say to litigants, do they need to disclose gifts on

414
00:26:06,080 --> 00:26:10,320
Speaker 5: their disclosure forms? So to a large degree it's up

415
00:26:10,359 --> 00:26:11,280
Speaker 5: to those judges.

416
00:26:12,040 --> 00:26:16,560
Speaker 1: Let's go through a few possible gift situations and you'll

417
00:26:16,560 --> 00:26:20,600
Speaker 1: tell me what's acceptable for different government employees. So a

418
00:26:20,680 --> 00:26:23,399
Speaker 1: lobbyist offers to pay one hundred and twenty five dollars

419
00:26:23,400 --> 00:26:25,720
Speaker 1: share in a private golf club's.

420
00:26:25,400 --> 00:26:30,560
Speaker 5: Green fees, what we reported is across all three branches

421
00:26:30,600 --> 00:26:36,200
Speaker 5: of government, that's not an acceptable situation because the general

422
00:26:36,320 --> 00:26:40,040
Speaker 5: notion is that if someone has business before the government,

423
00:26:40,560 --> 00:26:44,320
Speaker 5: it's unacceptable to take a gift from that person, because

424
00:26:44,359 --> 00:26:48,440
Speaker 5: that could be seen as trying to improperly influence their decision,

425
00:26:49,119 --> 00:26:52,920
Speaker 5: their action, or possible inaction in a way that's favorable

426
00:26:52,960 --> 00:26:54,360
Speaker 5: to that lobbyist.

427
00:26:54,720 --> 00:26:58,280
Speaker 1: This one strikes me as it probably happens a lot.

428
00:26:58,359 --> 00:27:01,720
Speaker 1: A trade group offers two hundred dollar concert tickets. People

429
00:27:01,760 --> 00:27:06,160
Speaker 1: are always throwing around tickets to different events.

430
00:27:06,760 --> 00:27:13,120
Speaker 5: There's some fairly complicated rules on what events are permissible

431
00:27:13,200 --> 00:27:19,480
Speaker 5: to accept. There are public events that are in some

432
00:27:19,560 --> 00:27:24,440
Speaker 5: cases permissible, but not in a case where there's significant

433
00:27:24,840 --> 00:27:30,639
Speaker 5: value attached to tickets, like in this hypothetical scenario. So again,

434
00:27:30,760 --> 00:27:33,800
Speaker 5: in this case, all three branches of government would say

435
00:27:33,840 --> 00:27:36,600
Speaker 5: that's not an acceptable gift, that if you want to

436
00:27:36,640 --> 00:27:39,040
Speaker 5: take the tickets, you need to pay the fair market

437
00:27:39,160 --> 00:27:40,720
Speaker 5: value for those tickets.

438
00:27:40,960 --> 00:27:44,320
Speaker 1: And here's one that sounds very familiar, an invitation to

439
00:27:44,400 --> 00:27:46,960
Speaker 1: fly on a jet owned by a friend for a

440
00:27:47,080 --> 00:27:48,840
Speaker 1: quail hunting trip in Idaho.

441
00:27:51,240 --> 00:27:55,440
Speaker 5: In that case, we said, essentially in all three branches

442
00:27:55,480 --> 00:27:59,400
Speaker 5: of government in Congress, the executive branch, and the judiciary,

443
00:28:00,119 --> 00:28:06,199
Speaker 5: that would be permissible because of the personal friendship aspect.

444
00:28:06,680 --> 00:28:11,040
Speaker 5: But in Congress it would need the approval of the

445
00:28:11,040 --> 00:28:14,480
Speaker 5: House Ethics Committee or the Senate Ethics Committee. In the

446
00:28:14,560 --> 00:28:18,439
Speaker 5: executive branch, it would be permissible if the gift is

447
00:28:18,520 --> 00:28:22,959
Speaker 5: motivated by friendship and not by business interests. And in

448
00:28:23,040 --> 00:28:26,320
Speaker 5: the Judiciary, we said that it would be permissible, but

449
00:28:26,920 --> 00:28:30,879
Speaker 5: that the flight would need to be disclosed on the

450
00:28:30,960 --> 00:28:33,040
Speaker 5: judge's annual financial statement.

451
00:28:33,720 --> 00:28:37,920
Speaker 1: And I understand that Justice Thomas is going to after

452
00:28:37,960 --> 00:28:43,520
Speaker 1: the fact update his disclosures. So you talked to Walter Shabb,

453
00:28:43,560 --> 00:28:46,760
Speaker 1: who ran the Office of Government Ethics for four years.

454
00:28:47,040 --> 00:28:50,320
Speaker 5: Tell us what he said about He says, essentially that

455
00:28:50,600 --> 00:28:55,840
Speaker 5: the practical effect is that ethics laws applied more rigorously

456
00:28:55,960 --> 00:29:00,120
Speaker 5: to low level executive branch employees than to members of

457
00:29:00,160 --> 00:29:03,480
Speaker 5: the Supreme Court. And he believes that's the travesty and

458
00:29:03,520 --> 00:29:07,600
Speaker 5: that it's standing ethics on its head. And he believes

459
00:29:07,840 --> 00:29:10,000
Speaker 5: that the higher up you are, the more you should

460
00:29:10,040 --> 00:29:13,680
Speaker 5: be accountable, because you have more power to do harm.

461
00:29:14,120 --> 00:29:16,960
Speaker 5: I had talked to a number of ethics officials across

462
00:29:16,960 --> 00:29:20,880
Speaker 5: the government in working on this, and the idea is

463
00:29:20,960 --> 00:29:27,320
Speaker 5: that you want an open government free from undisclosed financial

464
00:29:27,400 --> 00:29:35,360
Speaker 5: or business interests that are operating in secrecy to influence

465
00:29:35,440 --> 00:29:42,200
Speaker 5: the outcome of legislation or executive actions or court proceedings.

466
00:29:42,840 --> 00:29:48,160
Speaker 5: These were all post Watergate era reforms, and there are

467
00:29:48,480 --> 00:29:53,360
Speaker 5: several hundred ethics officers across the federal government who are

468
00:29:53,440 --> 00:29:58,080
Speaker 5: working to try to ensure the government is as open

469
00:29:58,120 --> 00:29:59,920
Speaker 5: as it could be. Now, of course, we know that

470
00:30:00,880 --> 00:30:05,200
Speaker 5: in practice it doesn't always work that way. But what

471
00:30:05,680 --> 00:30:10,720
Speaker 5: is driving the reform effort for the Supreme Court, which

472
00:30:10,840 --> 00:30:15,240
Speaker 5: so far has resisted those efforts, is a similar notion

473
00:30:15,480 --> 00:30:19,000
Speaker 5: that the Supreme Court should be just as open as

474
00:30:19,040 --> 00:30:20,600
Speaker 5: the other branches of government.

475
00:30:20,720 --> 00:30:25,320
Speaker 1: Thanks David, your article illuminates a real problem. That's Bloomberg

476
00:30:25,400 --> 00:30:30,360
Speaker 1: Legal reporter David Voriakis coming up next a Tennessee anti

477
00:30:30,440 --> 00:30:35,600
Speaker 1: dragshow law is deemed unconstitutional. This is Bloomberg and that's

478
00:30:35,640 --> 00:30:38,240
Speaker 1: it for this edition of the Bloomberg Law Show. Remember

479
00:30:38,280 --> 00:30:40,360
Speaker 1: you can always get the latest legal news on our

480
00:30:40,400 --> 00:30:44,560
Speaker 1: Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,

481
00:30:44,760 --> 00:30:49,800
Speaker 1: and at www dot Bloomberg dot com, slash podcast Slash Law,

482
00:30:50,200 --> 00:30:52,760
Speaker 1: and remember to tune into The Bloomberg Law Show every

483
00:30:52,840 --> 00:30:56,720
Speaker 1: weeknight at ten pm Wall Street Time. I'm June Grosso,

484
00:30:56,880 --> 00:30:58,400
Speaker 1: and you're listening to Bloomberg