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BRC Group Holdings (the company formerly known as B. Riley Financial) filed a $735 million lawsuit against Willkie this week, alleging the firm aided and abetted a fraud in connection with a 2023 take-private deal involving Franchise Group, the company that runs Pet Supplies Plus. According to the lawsuit, fraud was like catnip for Franchise Group founder Brian Kahn, who the plaintiffs allege ran a “sophisticated fraud” to secure funds that helped him pay off debts incurred defending against a different hedge fund fraud where he ultimately pleaded guilty. Kahn’s wife is also named in the new suit.

BRC and its co-plaintiffs seek disgorgement of Willkie’s fees.

Willkie’s relationship with Kahn has been star-crossed for a while. Last February, a Delaware bankruptcy judge removed Willkie from serving as bankruptcy counsel for Franchise Group after amidst concerns about the firm’s conflicts of interest. As the judge noted at the time, Willkie failed to create any ethical walls until after the conclusion of the take-private deal, meaning all the knowledge gained by the firm from that transaction was properly “imputed to the firm as a whole.”

Now BRC, who led the equity financing for the take-private deal wants its money back and sees Willkie as partly responsible for duping them in the first place.

But, hey, we’re finally not talking about the firm signing away its integrity to the Trump administration so look on the bright side!

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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A disbarred Rockville attorney pleaded guilty Jan. 9 to theft and fraud schemes worth more than $4.2 million.

Sari Kurland, who was suspended from the practice of law and indicted in 2024 amid an escalating investigation by the Maryland Attorney Grievance Commission, entered a plea agreement in Montgomery County Circuit Court on Friday, court records show.

Kurland, 64, pleaded guilty to one count of theft over $100,000 and 15 counts of misappropriation by a fiduciary, and faces a maximum of 15 years in prison, according to the plea agreement.

The majority of the schemes involved a mix of high ROI fibs about oil and crypto currency. Word to the wise — unless your name is Eric Adams, Jake Paul, or Hawk Tuah Girl, leave crypo-scamming people out of their hard-earned cash to the professionals.

Kurland hired Covington & Burling to represent her in the proceedings to come.

Disbarred Attorney Pleads Guilty To Fraud Schemes Worth $4.2 million [The Daily Record]

Chris Williams became a social media manager and assistant editor for Above the Law in June 2021. Prior to joining the staff, he moonlighted as a minor Memelord™ in the Facebook group Law School Memes for Edgy T14s . He endured Missouri long enough to graduate from Washington University in St. Louis School of Law. He is a former boatbuilder who is learning to swim, is interested in critical race theory, philosophy, and humor, and has a love for cycling that occasionally annoys his peers. You can reach him by email at cwilliams@abovethelaw.com and by tweet at @WritesForRent.

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Which are interesting, if somewhat expected, allegations following a partner’s lateral move. These things don’t typically come to litigation, but they’re certainly known pain points. But then there are the escort allegations.

According to the complaint, Cretella met up with an escort and other women while traveling on firm business. During a forensic examination of Cretella’s firm-issued and firm-paid phone, it was revealed that he allegedly engaged in “highly inappropriate and potentially unlawful personal conduct that Cretella engaged in during Firm-funded travel,” that included texts messages with an “upscale dominatrix” known as “Goddess Kat.”

Then there’s the cyberstalking allegations. There’s a separate federal suit in the U.S. District Court for the District of Connecticut by Otterbourg’s chairman, Richard L. Stehl, and its president, Richard G. Haddad, over those claims, and Cretella has filed a motion to dismiss. The Otterbourg firm leaders allege Cretella engaged in repeated “unauthorized surveillance” of their personal lives. As reported by Law.com:

“Forensic evidence shows that over a period of years, Cretella repeatedly accessed private, non-client files belonging to both men without their permission or legitimate purpose,” the most recent suit states. “These were not stray clicks or accidental views. The data shows hundreds of deliberate intrusions – often in the dead of night – targeting files that … had nothing to do with firm business.”

Some of this sensitive information allegedly included home security system codes and login credentials for live camera feeds inside and outside the Stehl family residence, personal tax returns and Social Security password files, privileged legal communications relating to “deeply personal family matters,” including divorce proceedings and custody arrangements involving grandchildren, confidential medical records, private financial statements, as well as “intimate personal details,” including children’s employment documents and home renovation plans.

Now those are more lurid allegations.

But in Cretella’s motion to dismiss the federal action, he alleges the personal information was saved on the firm’s computer system and accessed through a preview function after performing searches. “Although plaintiffs try to hide behind irrelevant allegations about how Otterbourg’s computer system was intended to operate, the complaint confirms a simple fact fatal to plaintiffs’ standing: Using firm-provided credentials, Cretella and other attorneys searched the firm’s computer network and viewed the results of those searches, which allegedly included files plaintiffs saved to the firm-wide network. The only plausible conclusion is that plaintiffs failed to take any measures to prevent their files from being accessed through routine, firmwide network searches.”

Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter @Kathryn1 or Mastodon @Kathryn1@mastodon.social.

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The five justices — as a reminder for non-lawyer readers, New York’s lower courts are called “Supreme Court” and its judges are “justices,” I don’t make the rules — didn’t agree on much, but the crux of it is that Trump’s business empire is no longer on the hook for the roughly $350 million (just a shade under $500 million including interest) the trial court demanded. The appellate opinion struck down that award, ruling that it amounted to an unconstitutionally excessive fine as opposed to mere disgorgement of ill-gotten gains.

The court affirmed that Trump lied, cheated, and cooked the books to inflate his wealth, and it left intact the structural injunctions effectively barring his family from running a business in New York. But, pop the champagne, Donny! You “won.”

Or sparkling wine as the case may be… don’t want to have to cough up for that new tariff price for the genuine Champagne region.

Today’s posture reads like a procedure exam drafted by the cruelest law professor moments after learning their spouse has been secretly sleeping with the dean. All but one of the justices agreed that Attorney General Letitia James was well within her rights to bring this case. Justice Moulton, joined by Presiding Justice Renwick, upheld the finding of fraud and the injunctive relief, but struck the disgorgement as an Eighth Amendment “excessive fine.” Justice Higgitt, with Justice Rosado, thought the trial court made errors requiring a new trial. Then there’s Justice Friedman, who seems to reside in a fantasy world.

Without any path to a three-justice majority and desperately in need of getting this opinion out the door, Higgitt and Rosado conceded to join Moulton and Renwick in the decretal alone. Now the basketcase of an opinion can be appealed to the New York Court of Appeals (which is the actual NY “supreme court” where they are “judges,” just roll with it).

So why can’t New York collect on the disgorgement? A few reasons from Justice Peter Moulton’s opinion, which serves as the closest to a clear majority opinion in this matter (we’re going to omit citations in all these quotes for ease of reading):

However, the disgorgement order here departs from the traditional equitable limitations identified in Liu in two ways: first, it does not provide recompense to any victims, and second, it imposes joint and several liability. Accordingly, the instant disgorgement order constituted a fine.

One of the longstanding issues with this case — which Trump’s people have, inaccurately, claimed as fatal — is the lack of a victim who lost any money. At the risk of oversimplification, the theory of the case is that the Trump Organization routinely lied about value to secure favorable terms, financial institutions went along with this either because they were genuinely duped or didn’t care, and ultimately the bets paid off. The state’s argument is that it doesn’t matter if a bank called on a 3-7 offsuit and managed to hit a straight, it’s still fraudulent for a New York business to conduct business this way because, eventually, the cards aren’t going to fall and the state is going to end up holding the bag.

But can you actually have “disgorgement” when no one lost anything? The appellate court said no. Likewise, it’s hard to call it disgorgement when it’s joint and severable because how can an individual party be liable for returning assets they personally didn’t pocket? And if it’s a punitive fine, the Eighth Amendment requires it not be unduly excessive.

The opinion also questioned whether the award, even as a fine, accurately reflected the losses.

Additionally, a fine cannot be proportionate to the offense unless it is reasonably calculated to encompass only the actual proceeds that defendants realized from their fraud. To obtain disgorgement, the Attorney General bears the initial burden of establishing “a reasonable approximation of profits causally connected” to defendants’ violations. Where both legal and illegal conduct is implicated, the Attorney General “must distinguish between the legally and illegally derived profits.”

These assets were worth something, so the deals were likely going to happen on some terms. Assuming this opinion ends up carrying the day on appeal, the Trump Organization will end up coughing up some amount of money — as a fine — but nowhere near the current figure.

End of good news for Trump.

On the record before us, we find that Supreme Court properly exercised its discretion in awarding injunctive relief. Defendants persistently and intentionally inflated the asset values reported in their SFCs from 2014 to 2021, for numerous assets per each SFC. Despite the wrongfulness of their conduct, Supreme Court believed that defendants lacked remorse. Indeed, when asked at trial whether he still approved of McConney and Weisselberg’s work in preparing the SFCs, President Trump stated “[y]ou haven’t shown me anything that would change my mind.”

….

Additionally, the independent monitor noted in her most recent report to Supreme Court that, among other things, the Trump Organization lacked sufficient internal controls over financial reporting. Without adequate internal controls, Supreme Court reasoned that the Trump Organization “does not have the ability to . . . protect against fraud in the future.” Considering these factors, Supreme Court had ample bases to find that defendants would continue to engage in fraudulent and illegal activity.

It’s rarely a win when the opinion repeatedly cites your “fraudulent and illegal activity.” But then again, this is the guy who claims the Mueller Report was an exoneration, a claim specifically disproven by… the Mueller Report. Trump has never actually lost in his own mind, he just wins at varying levels of catastrophic.

While the two justices seeking a new trial were willing to drop their fight for the sake of moving the case along to a higher court, Justice Friedman wanted to give Trump the total victory he craved, by denying that the law as written even applies to the Trump Organization’s dealing with banks.

This action essentially turns section 63(12) on its head. The leniency with which the courts have construed the requirements for pleading and proving fraud under section 63(12) – a leniency that has been extended for the purpose of facilitating the use of the provision to prevent the exploitation of unsophisticated consumers, investors and small businesses – is here being used by Attorney General Letitia James to apply section 63(12) to a scenario to which that provision has never before been applied, or even thought to apply. Specifically, the Attorney General in this case has utilized the flexibility afforded her under section 63(12) to unwind complex financial transactions that were negotiated, face-to-face and at arm’s length, between a privately held real estate organization – that of defendant Donald J. Trump, the former president and current president – and ultra-sophisticated banks, insurance companies and government entities, which were advised by equally sophisticated lawyers, accountants, and other business professionals.

What happened to textualism? There’s nothing in 63(12) that magically limits it to “only if the victim is unsophisticated.” There are good policy reasons for the government to, generally speaking, not use taxpayer funds to vindicate rich businesses that could fight their own fraud battles. But the threat to the state isn’t necessarily that the Trump Organization took advantage of banks, it’s that an organization routinely pursuing fraudulent business practices screws the whole business environment. Friedman’s interpretation is the sort of deregulatory fan fiction that weaponizes complexity by removing any avenue to combat a fraud that isn’t obvious enough for Deutsche Bank to understand or care enough about to challenge. Fraud that happens to work out to the benefit of both sides can still be fraud and can still have external impacts on the market. Liquidity, pensions, insurance reserves… there are a lot of reasons why a state would authorize an Attorney General to step in there.

Nothing in 63(12) precludes such a case. It’s all just vibes Friedman reads into the plain text of the statute.

You’d think Trump would at least tacitly understand the argument that the government can pursue fraudulent real estate representations even if the lenders don’t care since that’s THE SAME LOGIC AS THE PROBE HE’S LODGED AGAINST LETITIA JAMES. That case seems, at this point, to be such garbage that his prosecutor is begging James not to force him to go to a trial, but it’s comical hypocrisy to act like this is an unheard of theory.

He also challenges the facts of the case:

…the one objective error of fact that the Attorney General has identified that was used as a basis for a valuation in the SFCs – the multiplication of the actual size of the Triplex by three – has not been shown by the Attorney General to have been anything other than an unintentional error…

If Justice Friedman is out there, I’m currently selling the Brooklyn Bridge and can get him a good deal!

Who amongst us hasn’t accidentally added 20,000 square feet to our paperwork? It’s just too easy to overlook something as trivial as… the size of a fucking car dealership when describing our homes.

These are just not serious people.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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Kwon and his company Terraform Labs created two cryptocurrencies: Luna and UST. Luna was a typical cryptocurrency like Bitcoin. But UST was a stablecoin. Stablecoins are generally backed by legal tender currencies like the U.S. dollar which keeps its value stable.

But UST did not have a cash reserve to peg its value. Instead, its peg to the U.S. dollar was based on an algorithm that encourages trader arbitrage. For example, if the value of one UST becomes less than $1, people can buy UST, convert it to Luna, and then sell that Luna for a profit. Conversely, if the value of one UST is greater than $1, people can buy $1 worth of Luna, convert it to UST, then sell the UST for a profit. In theory, this adversarial relationship between the two coins were supposed to keep UST’s value in check.

Kwon also established the Anchor Protocol to incentive use of UST. Anchor was advertised as a savings platform where people would deposit their UST and receive a guaranteed 20% interest. At that time, high-yield savings accounts offered at most 1%. The unusually high return rate attracted investors, mostly people looking for alternative investments.

In May 2022, a very large UST trade caused it to lose its peg and stability. As UST’s value fell, more Luna coins were produced in an attempt to stabilize the price. But instead, the massive production of the Luna coin devalued that as well. This resulted in a death spiral of both currencies — now worth pennies on the dollar.

Kwon and Terraform Labs were hit with civil lawsuits and criminal investigations in both the United States and South Korea where he was based. During the UST crash, Kwon was in Singapore claiming that he was working on restoring the peg. But later he fled the country. He was finally arrested in Montenegro where he was caught using a fake Costa Rica passport to board a flight to Dubai.

A good portion of UST holders were retail investors. There are many stories of people who lost their life savings on UST. Some of these people cashed out investments, sold appreciated assets, and withdrew from their tax-deferred retirement accounts triggering taxable income.

Unfortunately, the IRS issued two pieces of guidance. The first is Notice 2014-21 which stated the basic tax rules for cryptocurrency transactions. It stated that unless someone is in the trade or business of trading cryptocurrencies, a taxpayer is only entitled to claim a capital gain or loss.

The second guidance from the IRS was a chief counsel memorandum released in 2023. This memorandum stated that taxpayers cannot claim a worthlessness or abandonment deduction for cryptocurrencies. This is because both of these are miscellaneous itemized deductions and these deductions have been disallowed for the years 2018 to 2025 due to the Tax Cuts and Jobs Act.

Some taxpayers had sufficient capital gains to offset their losses. But others sold business assets, withdrew from tax-deferred retirement accounts or took other actions that triggered ordinary income. In these cases, capital losses can only offset $3,000 of ordinary income, with the remainder to be carried forward indefinitely. This created the unusual situation where the taxpayer has to pay taxes on income he or she does not have.

There were some tax-planning options to minimize the sting. Those who kept their Luna or UST coins could follow the guidance stated on the IRS 2023 memorandum to claim either the abandonment loss or the worthlessness loss on January 1, 2026, which is when miscellaneous itemized deductions would be allowed once again. Unfortunately the Big Beautiful Bill which recently passed made the disallowance of the miscellaneous itemized deduction permanent.

Some have accused Kwon of running a Ponzi scheme. Indeed there is evidence that money from retail investors was used to pay earlier investors. Most of them were large, institutional investors who cashed out before the crash. If this is the case, then taxpayers can use the Ponzi scheme safe harbor explained in Revenue Procedure 2009-20, a ruling issued in response to the Madoff Ponzi scheme that year. This is normally considered a theft loss deduction.

There are two problems with using this safe harbor. First, the taxpayers using this procedure can claim up to 95% of the losses not covered by insurance. This is not a major hurdle for most people as they will simply accept the 5% loss. But the bigger problem is that the IRS has announced that Kwon engaged in a Ponzi scheme and may challenge this deduction in an audit.

The other option is to claim a general theft loss deduction for the money they lost. This would be considered a theft loss in connection with the production of income. This is because the taxpayer had a profit motive when they put their USTs into the Anchor Protocol. It is important that it is not labeled as a personal theft loss which can only be claimed if they live in a federal or state disaster area. A taxpayer claiming a theft loss must prove that the loss resulted from a taking of property that was illegal under state law where the theft occurred and was done with specific intent to steal. Generally, specific intent to steal was hard to prove in investment cases.

So what does Kwon’s guilty plea mean? It could show he had the specific intent to steal making it easier to claim the theft loss deduction. In court, Kwon said, “In 2021, I made false and misleading statements about why UST regained its peg. What I did was wrong and I want to apologize for my conduct.”

Despite this development, the IRS could still be reluctant to allow a theft loss deduction. However, the IRS seems to recognize that online cryptocurrency scammers exist and taxpayers should not have face adverse tax consequences in addition to their financial pain. Last March, the IRS released another chief counsel memorandum which allows taxpayers who were victims of phishing scams or pig-butchering scams to claim a theft loss deduction.

For people who lost money on Luna or UST, they were initially faced with limited tax relief options. But in light of Kwon’s recent guilty plea on fraud charges and the recent chief counsel cemorandum by the IRS, taxpayers may be able to take advantage of a theft loss deduction.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

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Not, however, without the slightest jolt when we gently tapped the vehicle behind us. Then there was another tiny impact against the car in front of us when he pulled forward to even out. “Bumpers are for bumping,” my friend said matter-of-factly.

Coming, as I do, from a part of the world where there is typically space to leave several car-lengths between vehicles in a parking lot, and where many drivers view the slightest scratch to the treasured vehicles from which they derive their entire personalities as a murderable offense, this “bumpers are for bumping” philosophy caused me to momentarily panic. I looked, though, as closely as I could at all three vehicles, hopefully without letting my friend catch me being that uncool. I couldn’t make out even the slightest amount of damage to any of them.

Since my preconceptions were challenged on this fateful day many years ago, I have continued to mellow out on minor, purely cosmetic damage to motor vehicles. If you treat every ding and dent to the skin of an object you’re going to be driving around outside in all kinds of weather at 70 miles per hour like it is the vilest insult to your beloved mother, I just don’t think we are going to be friends.

Compared to my evolution on this subject, the rental car company Hertz has decided to go in the opposite direction. Instead of a human person taking three seconds to walk around the car when you return it in order to spot any glaringly obvious problems, Hertz is now running its returned vehicles (at least at its airport locations) through an artificial intelligence hardware and software system called UVeye.

UVeye’s damage scanning system looks a bit like the entrance to an automated car wash, except instead of dousing your car with a delightful medley of multicolored solutions, it bathes your car in light that can detect imperfections invisible to the human eye. Reports are rampant of Hertz customers being automatically charged hundreds of dollars for damage allegedly discovered by UVeye that is trivial, non-existent, or predated their rental. When rental customers have tried to contest these charges, they faced the challenges we have all become accustomed to of needing both the patience of Job and the luck of the Irish to ever reach an actual human being capable of doing something to address the issue.

For now, you can mostly prevent the AI nanny state from charging you for using your bumper for bumping if you give your business to one of the other major domestic rental car companies. That being said, other car rental companies are reportedly beginning to invest in implementing similar technologies. Soon, we might all simply be stuck with another dystopian layer built in to the already unpleasant task of renting a car while traveling.

Car rental companies are far from the only businesses to enjoy the power imbalance of holding all the informational cards when using AI to accuse customers of causing damage to property they no longer have access to. For instance, a London-based academic recently renting an apartment in Manhattan through Airbnb was stunned to discover when she got home that she was being charged the equivalent of more than $15,000 for damage she supposedly caused to the premises. After Herculean efforts with customer service in pointing out that several images from the host allegedly showing the damage were inconsistent with one another and had apparently been altered by AI, Airbnb not only eventually dropped the additional charges but also refunded her for her entire stay. The host, meanwhile, was given a warning for violating Airbnb’s terms. His listing for the apartment remains live on the site.

Of course, customers can be AI cheaters too. Surely there are many examples out there of consumers using artificial intelligence to try to fake evidence of a bad stay, a faulty product, etc. in order to get something of value for free.

Still, even as AI becomes increasingly affordable and accessible, companies that have themselves outsourced so much internal judgment and decision-making to machines will always have the advantage. A corporation rarely has to listen to an individual calling in to try to rectify something, and the big ones can afford to alienate a lot of us (especially if all their competitors are employing similar business practices) before they see any consequences in their bottom lines.

Completely faked images or videos are one thing. I suppose short of all of us becoming AI-debunking experts, we are just going to have to find ways to live in a world where you really can’t believe a lot of what you see with your own eyes. When it comes to shit like UVeye, though, can we not just all agree to pull the plug?

Renting out cars could be profitable as a business long before UVeye came along. UVeye does not improve the customer experience, but rather annoys and alarms consumers. Let’s say it could detect some microscopic dimpling in a “bumpers are for bumping” scenario — is that really a valid thing to charge a customer for anyway if no unaided human could detect it?

Even if UVeye makes Hertz a little more money, it is not a reasonable trade-off for what it takes away from the car rental experience for the traveler. Perhaps executives somewhere at some point will realize that using AI to more efficiently screw their own customers is not a good long-term recipe for success.

Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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Numerous companies this month have announced that they are withdrawing or reducing their earnings guidance for the year. For instance:

• On Tuesday, Oscar Health announced that it is anticipating a loss from operations of $200 million to $300 million for the year, after previously expecting earnings of $225 million to $275 million.
• Last week, Elevance Health announced that it reduced its outlook for adjusted earnings per share to about $30 for the year, compared to $34.15.
• On Thursday, Molina Healthcare announced that it now expects its full year 2025 adjusted earnings to be $19 per diluted share, compared to $21.50 to $22.50 predicted in early July. This is the second time they’ve reduced it this month.
• Earlier this month, Centene announced that it is withdrawing its 2025 GAAP and adjusted diluted earnings per share guidance.

So why are so many insurance companies’ fortunes flailing?

A lot of it has to do with higher-than-anticipated utilization, particularly in the individual market, experts say. Patients are using expensive weight loss drugs, accessing behavioral health expertise and other services more than they have in the past — these are a few causes for higher claims faced by insurers.

 And there may be even more uncertainty ahead for insurers and their members with Medicaid cuts and the upcoming expiration of the ACA enhanced premium tax credits, which are expected to increase costs and cause many to lose coverage.

The challenges

 The individual market seems to be one of the biggest pain points for many insurers right now, with higher-than-expected utilization driving up costs, according to Ari Gottlieb, principal of consulting group A2 Strategy Corp.

“One of the things that’s happening everywhere, where the [individual market] is just bad, is the business was underpriced,” he said in an interview. “And we’re seeing utilization pick up. People who have individual plans are just using them more: more weight loss drugs, high-cost specialty, behavioral health, you name it. By and large, insurers didn’t plan for that.”

He added that more people were put on an individual plan during the Medicaid redetermination process, in which people were no longer considered eligible for Medicaid. This also led to higher levels of acuity and utilization.

Elevance CEO and President Gail K. Boudreaux pointed to these particular challenges in the company’s earnings call, stating that its adjusted earnings reflected “elevated medical cost trends across ACA and slower-than-expected Medicaid rate alignment.”

In other words, during the pandemic, Medicaid paused eligibility redeterminations, so many people stayed enrolled even if they weren’t using any care. Now that redeterminations have resumed, many of those low-utilization members have been removed, but states are still using utilization data from a few years ago (which includes those members) to set plan reimbursement rates. As a result, Medicaid plans are being paid less relative to the higher needs of their current enrollees, according to Gottlieb.

Oscar Health, which provides individual and family plans, is facing higher utilization and acuity as well. It stated in its announcement that it now expects a medical loss ratio of 86% to 87% and higher ACA Marketplace risk scores.

Like Oscar, Molina has a major presence in the individual market, and said (Opens in a new window)that its updated guidance is disproportionately attributed to Marketplace.

“Our second quarter results and revised full year outlook reflect a challenging medical cost trend environment,” said Joseph Zubretsky, president and CEO, in a statement. “The current earnings pressure we are experiencing results from what we believe to be a temporary dislocation between premium rates and medical cost trend which has recently accelerated.”

Another challenge insurers are facing is a crackdown on fraud, according to Hal Andrews, Trilliant Health president and CEO. He noted that the U.S. Senate recently targeted a loophole that allowed people to be dual enrolled in Medicare Advantage and get coverage from the Veterans Health Administration. The loophole permits healthcare insurers to charge Medicare to cover veterans even though they’re getting their treatment through the VHA. Lawmakers introduced a bill that would allow the VA to charge private health insurers in the Medicare Advantage system for medical care that it provides for their insurers’ members.

Further, CMS recently estimated that 2.8 million Americans are enrolled in two or more Medicaid/ACA exchange plans, forcing the government to pay multiple times for people to receive health coverage. CMS added that it is partnering with states to reduce duplicate enrollment, including providing states with a list of individuals enrolled in Medicaid in two or more states and asking them to recheck their eligibility.

“So even though they’re primarily getting their healthcare covered by one plan, the government is subsidizing premiums for multiple plans,” Andrews said in an email. “It’s kind of like Planet Fitness having members paying their monthly fee but never showing up.

“However, for insurers, that dynamic is changing and, as a result, they’re about to lose millions of these members, which is why many are withdrawing and adjusting their earnings guidance,” he added, referring to the recent policy changes from CMS and Congress.

The earnings cuts/withdrawals follow a similar announcement from UnitedHealth Group in May. The healthcare giant suspended its 2025 outlook and replaced Andrew Witty as CEO with Stephen J. Hemsley, who served as the company’s CEO from 2006 to 2017.

It’s worth noting, however, that while several insurers have blamed the individual market for their recent challenges, UnitedHealth Group’s story is a little different, according to Gottlieb. The company suspended its earnings due to increased utilization in Medicare Advantage, while several of these other insurers have stated that their MA businesses are performing as expected, Gottlieb noted.

What’s ahead?

The revised earnings guidances are actually “symptomatic of a bigger disease:” the growing unaffordability of healthcare in the U.S., according to one healthcare expert.

“My translation of it is, ‘We’re in trouble when it comes to the pricing. We’re possibly in trouble when it comes to the revenue, and we’re not quite sure what we can do. We want to do what we will do, so let’s withdraw our guidance while we figure it out,’” said Dr. Robert Pearl, former CEO of the Permanente Medical Group, who is currently a professor at Stanford University School of Medicine and Stanford Graduate School of Business. “I don’t see that they have a lot of solutions, because I don’t think they can raise the rates as much as they would like to to cover the cost. I don’t think they can reduce the cost as much as they would like to to stay within their rates.”

Pearl added that there are numerous upcoming headwinds for insurers, including the Medicaid cuts and the expiration of the ACA enhanced premium tax credits at the end of the year, which will increase premiums significantly. Elevance’s CFO, Mark Bradley Kaye, noted in the earnings call that the reconciliation bill and the expiration of the enhanced subsidies could “present near-term enrollment pressures and further shift in the risk pool.”

Gottlieb agreed that the challenges are only going to continue, stating that it’s going to be a “brutal” quarter and year for the individual market, and that next year could be even worse.

To another industry expert, the guidance cuts are a “wake up call” for the industry, and show a need to adapt more quickly.

“I think some of the things that are going to help them turn things around include making data faster and more useful, so getting up to date information on costs, claims, patient trends, so they’re not waiting weeks to be able to spot problems or make adjustments, connecting systems together that don’t normally talk to each other,” said Esteban Lopez, partner at consulting firm West Monroe.

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Christine Hunsicker Indicted in $300M Fashion Rental Fraud Case [WWD]

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Blood money can be as green as any other money, but investments have a tendency to take a hit when the company gets featured in Amnesty International reports. If there’s a risk your investment might end up knee deep in an assassination, that’s information that such a fund might arguably find… material?

Those same funds may have concerns about foreign bribes or international gambling sites with covert ownership.

One fund invested in such iffy companies under the management of Novalpina Capital Partners and it gave rise to a whole mess of foreign legal actions. But cutting across all the suits, the fund claims Novalpina misled it about the nature of these transactions and ultimately caused big losses while Novalpina claims it’s owed a bunch of money. But of particular interest to the American Biglaw audience is a 28 U.S.C. § 1782 petition seeking domestic discovery for use in a foreign proceeding filed in the S.D.N.Y.:

Weil, and particularly Gerhard Schmidt, co-managing partner of Weil’s German offices, was the Fund’s key legal advisor when under Novalpina GP’s control, including for all major acquisitions undertaken by the Fund (including NSO, LXO and Maxbet)….

Accordingly, Weil was responsible for conducting due diligence, negotiating, financing assistance, drafting transaction documentation, and supporting NCL in the management of Fund investments…. Schmidt managed the Fund’s investments by acting as a director in various Novalpina and Fund entities, and was one of the directors responsible for the Fund’s governance of NSO.

The fund wants the firm to produce a wide array of firm documents. Or, as the case may more realistically be, a privilege log listing a bunch of documents Weil won’t hand over. That said, the petition claims its requests primarily target “correspondence Weil had with third parties, or documents provided to Weil by third parties.” Weil isn’t a party to the lawsuit so they aren’t being accused of wrongdoing, but there’s a point where technically accurate analysis can open the door to client whitewashing. NSO was described as having “best in class” governance and compliance. In the class of spyware manufacturers… maybe that’s not a high bar? The petition claims they already have documents showing Weil involved removing references to a controversial Russian business figure’s ownership stake in a gambling site… where’s the materiality line on that?

We reached out to Weil about this matter but they did not respond. Which is understandable… it’s ongoing litigation.

This isn’t even the only 1782 petition in the matter, with Novalpina targeting the fund’s American-based current investment advisor as well as the Oregon Public Employees Retirement System, the fund’s largest investor.

You know who probably doesn’t like finding out their money is aiding in assassinations? Public pension funds!

But this all highlights the delicate game of telephone driving private equity. Pension funds rely on the say-so of the funds, who rely on the investment managers, who rely on the due diligence of law firms. It’s a legal version of human centipede, with each link more potentially obscured than the last, and you’re just trusting whatever comes out the other end.

Adding to the lunacy surrounding this case, the 1782 petition was submitted by Stone Hilton, the law firm you probably most remember connect with the words, “violently anally raped by a cylindrical asteroid in front of my wife and children (Opens in a new window),” because that’s what the co-founder of Stone Hilton allegedly said he hoped to do to the First Assistant Attorney General of Texas.

2025 has been a wild year.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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Following the March departure of CEO Christine Hunsicker from CaaStle in response to allegations of financial misconduct, missed payments and fraud, the fashion startup has filed for Chapter 7 bankruptcy. The filing says the company had between 200 and 999 creditors and $10 million to $50 million in assets and liabilities.

Elliott-Backed Claire’s Eyes Sale as Tariffs Hit Budget Jeweler [Bloomberg]
CaaStle Files for Chapter 7 Bankruptcy, Setting Up Liquidation [WWD]

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Fortunately, a few months ago, the IRS issued Chief Counsel Memorandum 202511015 which stated that certain online scam victims can claim a theft loss as an itemized deduction. The memo gave examples of three scammed taxpayers who are eligible to claim a theft loss connected to the production of income.

The first taxpayer was the victim of a compromised account scam where an impersonator contacted the taxpayer and told him that his investment account has been compromised and attempts were made to withdraw funds from the account. The impersonator told the taxpayer to set up a new account controlled by the impersonator and transfer the money there. The taxpayer authorized distribution from IRA accounts and to transfer the distributed funds to the new account created by the scammer. After the taxpayer makes the transfer, the impersonator transfers the money to an overseas account.

The second taxpayer was a victim of a phishing scam. This taxpayer received an email that stated that his retirement accounts have been compromised. The email contained a link which would supposedly restore his account and provided a phone number to a so-called fraud specialist. The taxpayer contacted the fraud specialist who then instructed the taxpayer to click on the link. By doing so, the scammer was able to obtain the taxpayer’s login information to his retirement accounts and used it to transfer the funds to an overseas account. While the facts are similar to the first taxpayer, the second taxpayer did not authorize the scammer to transfer the taxpayer’s funds to the overseas account.

The third taxpayer is a victim of the pig-butchering scam. The taxpayer was contacted by someone online. After some conversation, the scammer told the taxpayer about a secret investment opportunity that has better-than-market-rate returns using a proprietary investment platform. The taxpayer relying on the scammer’s rate of return installed the investment platform to his phone and then transferred money into this platform. Soon after transferring the money, his account balance grew immensely and the taxpayer added even more money. At some point, the taxpayer attempted to withdraw the money but was unable to do so unless he paid additional fees or taxes to the platform. The taxpayer became suspicious and through an online search learned that the investment platform was fake.

The IRS stated that the three taxpayers mentioned above can take a theft loss deduction for the amount of money they lost. Also, since their theft was connected to a transaction entered into for profit, it is not considered a personal theft and thus not subject to the limitations imposed due to the Tax Cuts and Jobs Act.

While this is good news, those who are being audited will not win on this issue simply by sending a copy of this memo to the auditor. This is because the memorandum does not address two issues that might be scrutinized by tax auditors.

The first issue is whether there is a reasonable chance of recovery of the stolen funds. If there is a chance of recovery, the theft loss cannot be claimed until something happens to show that there is no longer a chance of recovery. In most cases, scam victims have a low chance of getting their money back, usually because the scammers are located overseas. Even filing a police report will not help, especially if the local agency does not have the adequate expertise or resources.

But if a victim files a civil lawsuit against the scammer and other parties, such as a bank or cryptocurrency exchange platform, it is arguable that there is reasonable chance of recovery. Most scam victims having learned their lesson don’t want to pay for a lawsuit unless they are guaranteed to recover. And most attorneys will not take a case on contingency unless they are reasonably certain to recover. As these lawsuits tend to take months or years to settle, if the taxpayer has income from cashing out investments or retirement accounts, they may not be able to claim the theft loss on the same year to offset that income.

The IRS will look at the facts and circumstances of each case to see whether there is a reasonable chance to recover the stolen funds. However, certain events could show possible recovery, such as obtaining a prejudgment attachment against the defendant’s assets before a lawsuit is concluded.

The second issue is whether the scammer violated the theft laws in the state where the victim lived. In most states, scammers have committed theft by false pretenses. The elements usually are 1) a false statement made by the scammer; 2) transfer of money or property in reliance of the scammer’s false statements; and 3) the scammer had the specific intent to steal from the victim.

Proving specific intent will be the most difficult because in most cases, the scammer will not admit to stealing from the victim. Instead, circumstantial evidence will be needed to prove intent. This includes chat records, and in the case of pig butchering scam victims, screenshots of the scammer’s so-called investment platform showing fake gains.

Considering the tax auditor’s perspective might help. He or she might analyze whether the facts show a theft or simply a bad investment. A taxpayer who lost a large chunk of their investment will be inclined to argue there was a theft in order to get better tax benefits.

One final note about the IRS memo is that it does not address those who lost money due to cryptocurrency failures (such as the Luna Stablecoin) and exchanges that have gone bankrupt such as FTX, Celsius, Three Arrows Capital, and Mt. Gox, to name a few. Some of the masterminds of these organizations have arguably committed theft by using customer deposit funds for lavish personal expenses or to pay early investors.

This recent IRS guidance should make taxpayers feel more comfortable about taking the theft loss deduction so long as the requirements are met. However, claiming a large loss can increase their chance of an audit and taxpayers will need to show more than a copy of this memo to prove their case.

On June 26, 2025, in coordination with Operation Shamrock, I will be giving a presentation explaining how to claim the theft loss and how to mitigate the tax consequences of withdrawing from investment and tax-deferred accounts due to scams. Operation Shamrock’s goal is to educate the public, mobilize collective action, and disrupt the operations networks of transnational organized criminals to prevent further harm. Please email me for more details.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

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As one of the biggest healthcare companies in the U.S., it has long been a reliable stock to invest in. But in the last few months, its stock has dropped nearly 50%, it has switched CEOs and seems to be on the back foot — a surprising development for one of the biggest names in healthcare. How did all this unfold and more importantly, can it dig out of it?

First, let’s begin with the cause for the stock to decline.

The first major drop came in April after UnitedHealth Group reported disappointing first quarter earnings. The healthcare giant also revised its adjusted earnings per share outlook for 2025 to between $26 and $26.50, compared to its previous forecast between $29.50 and $30. An analyst note from Leerink Partners called it an “uncharacteristic miss” for UnitedHealth Group.

Then, UnitedHealth Group announced last month that CEO Andrew Witty was stepping down due to “personal reasons” and would be replaced immediately by Stephen J. Hemsley, who served as the company’s CEO from 2006 to 2017. The company also suspended its 2025 outlook “as care activity continued to accelerate while also broadening to more types of benefit offerings than seen in the first quarter, and the medical costs of many Medicare Advantage beneficiaries new to UnitedHealthcare remained higher than expected.” This caused the stock to plummet again.

To make matters worse, the Wall Street Journal reported this month that UnitedHealth Group is under criminal investigation by the Justice Department for possible Medicare fraud. The investigation is related to UnitedHealth’s Medicare Advantage business, though the exact nature of the allegations is unclear. The company said in a statement that it has not been notified by the Justice Department about this investigation and called the Journal’s reporting “deeply irresponsible.”

Another publication also took aim at the insurance giant and largest employer of physicians in the country.

The Guardian reported in late May that UnitedHealth was secretly paying thousands of dollars in bonuses to nursing homes so that they didn’t transfer patients to hospitals which would lead to more expensive care. These patients were all part of UnitedHealth’s Medicare Advantage plans whose members are long term nursing home residents, and for whose care UnitedHealth receives taxpayer dollars.

In addition, UnitedHealth Group was sued by its shareholders this month, who accused the company of misleading them after the December killing of UnitedHealthcare CEO Brian Thompson. The lawsuit alleged that UnitedHealth Group understated the impact of Thompson’s murder on the company. A spokesperson for the company said UnitedHealth Group “denies any allegations of wrongdoing and intends to defend the matter vigorously.”

So why is the company beset by so many issues?

During a May 13 conference call following the announcement of Witty’s departure as CEO, CFO John Rex said its challenges can be put into three categories:

“One, greater-than-expected impact in UnitedHealthcare from the health status of new members,” he said. “Two, further acceleration of utilization within Medicare Advantage. Third, indications of a broadening of this higher trend to other areas and we are prudently anticipating these trends may go even further.”

On the same conference call, Hemsley said he is “deeply disappointed in and apologize for the performance setbacks we have encountered from both external and internal challenges. Many of the issues standing in the way of achieving our goals, as well as our opportunities, are largely within our control.”

What’s notable about UnitedHealth Group’s challenges is that other public insurers, such as Elevance, Aetna or Centene, are not suffering the same fate, according to one industry expert.

“Historically, they’ve been viewed as sort of the best managed health plan out there,” said Ari Gottlieb, principal of consulting group A2 Strategy Corp, in an interview. “And so you would have expected that if United is stumbling, everyone else is as well, but this seems to be an issue that’s mostly confined to United right now. We certainly haven’t seen any other health insurers come out and say, ‘We’re seeing the same thing.’ … Everybody else sort of said, ‘Things are sort of trending as we expected.’”

He added that part of UnitedHealth’s challenges can be explained by them being too aggressive in Medicare Advantage this year. The health benefits the company offered were “greater than the market and what reimbursement supported,” he said. In other words, the plan design was too generous, which prompted increased utilization while the associated benefit costs were not adequately covered by reimbursement rates.

Another expert argued that the healthcare industry has evolved, and things that went unnoticed in the past are now catching up, such as claims denials.

“[Witty’s] strategy really was one out of the old playbook, which is the way you become successful is you increase the medical loss ratio, by which I mean you lower the value, meaning that you invest less in actual care delivery. He does that by a lot of prior authorization, a tremendous amount of claims denial,” said Dr. Robert Pearl, former CEO of the Permanente Medical Group, who is currently a professor at Stanford University School of Medicine and Stanford Graduate School of Business, as well as a healthcare author and podcaster.

“The playbook that worked in a different time period, in a different Congress, different economic mindset, that’s all changed,” he continued. “The people who are going to be successful are going to be the ones not only who can respond, but who can anticipate and move forward. And UnitedHealthcare didn’t do that.”

While UnitedHealth Group is pointing to higher-than-expected utilization in Medicare Advantage as one of the key drivers of their struggles, there’s a broader issue at play, argued Dr. Adam Brown, an emergency physician and founder of healthcare advisory firm ABIG Health, as well as a professor of practice at the University of North Carolina.

The healthcare giant has its tentacles in insurance with UnitedHealthcare, provider services under Optum and pharmacy benefits with Optum Rx. And people are starting to question whether this vertical integration has exceeded its limits.

“I don’t think this is just a blip in the stock market,” Brown said. “I do believe it’s a bit of a reckoning where United, over the past several years, has been building an empire on Medicare Advantage and on vertical integration. And remember, Medicare Advantage is taxpayer dollars. … I think regulators, politicians — we see it even in a bipartisan manner — and of course patients are asking similar questions: Have we gone too far in vertical integration, and have we handed over too much of healthcare to one single entity?”

What’s ahead for UnitedHealth Group?

While Brown doesn’t believe this is just a “blip” for UnitedHealth Group, Gottlieb seems to disagree. He thinks the company’s issues will resolve in about a year. He gave the example of CVS Health, which was reportedly exploring a breakup back in October.

“They managed to turn things around, at least on the insurance,” he said. “I think they’re still struggling on their Oak Street clinics and some of the other assets. So these things are solvable. It will take some time.”

Bringing back Hemsley will also likely provide some stability for UnitedHealth, he noted. To fix their financial issues, they’ll likely reduce benefits in their MA plans, starting with supplemental benefits, Gottlieb stated.

He added that the DOJ investigation is probably of minimal concern to the company.

“You don’t normally see the federal government really going after large corporations and taking any significant action. To me, that’s most likely a lot of noise,” he said, noting that there may be some penalties they’ll have to pay, but nothing substantial.

Pearl agreed that UnitedHealth will likely come out of this.

“They are not going to fail. They have big reserves too, so they’re not going to go out of business,” he said. “They’re not going to run out of cash, but they are going to have to get their feet back on the ground and figure out what they’re going to do over the next 10 years.”

Brown argued that the company likely isn’t at risk of failing from a profitability standpoint. However, it could be at risk of some threats from a regulatory perspective due to the scrutiny from the DOJ, FTC, HHS and Congress. In addition, with the stock dropping, the public may be viewing the company differently.

“I think if all of those different verticals are speaking and controlling more, that may give us more of a signal of where things go with this company and other companies like it,” he said.

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Mark Roy Anderson, 70, who was living in Beverly Hills while on supervised release after serving more than 11 years in federal prison in the earlier case, pleaded guilty in April 2024 to two federal wire fraud counts, according to the U.S. Attorney’s Office.
…
[He] was sentenced Wednesday to 25 years behind bars for duping investors out of about $18.4 million…by falsely claiming that his companies invested in high-profit hemp farms and cannabis-infused retail products as well as a sham bottling business.

The current meta for scamming people for millions is running for office and launching a bitcoin, but Anderson’s scamming happened between 2020 and 2021. Selling snake oil back then would have been a little too on the nose, but the booming CBD and Delta 8 markets easily lended themselves to swindling investors greedy for quick returns out of their cash. Anderson is ultimately responsible for 45 investors losing ~$18.4 million by working with him.

You can shame him for frauding his investors and ending up in the big house — you probably should — but you’ve gotta give him credit for at least going big.

Remember: there’s a line between getting paid to zealously represent your clients and using your law degree to siphon people’s bank accounts. Make sure you and your clients know which side you’re on.

Disbarred Attorney Sentenced 25 Years for Hemp Farm Fraud Scheme [My News LA]

Chris Williams became a social media manager and assistant editor for Above the Law in June 2021. Prior to joining the staff, he moonlighted as a minor Memelord™ in the Facebook group Law School Memes for Edgy T14s. He endured Missouri long enough to graduate from Washington University in St. Louis School of Law. He is a former boatbuilder who is learning to swim, a published author on critical race theory, philosophy, and humor, and has a love for cycling that occasionally annoys his peers. You can reach him by email at cwilliams@abovethelaw.com and by tweet at @WritesForRent.

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The report, put together by FTI Consulting and Relativity based on interviews conducted by Ari Kaplan Advisors and surveys by Censuswide, gathered insights from corporate legal leaders from July to September 2024. It’s a slice of life detailing the hopes and fears of legal officers concerned about heightened regulation, the growing importance of ESG initiatives, and navigating investigations.

Seems as though they might have different concerns in February 2025.

A mere month into Trump II: Muskrat Love, the administration has moved swiftly to gut regulatory oversight, reverse diversity initiatives, and publicly retreat from white-collar criminal probes (except to prosecute companies for diversity, that is). While the report includes a few nods toward the risk of a changing environment, the respondents by and large describe a sliding doors world of continued cautious regulation in a steadily growing economy.

Regulation: From "Overload" to Open Season

When surveyed last summer, 41 percent of GCs ranked regulatory compliance as their number one risk. While it’s the second year in a row that regulation topped their concerns, the figure still reflected a sharp increase from 30 percent the year before​​. Trump rolled back — or at least attempted to roll back, depending on your sense of the judiciary’s willingness to enforce the Administrative Procedure Act — 100 or so regulations on his first day. Since then, he hasn’t stopped with everything from environmental to labor to basic occupational safety getting the (attempted) ax.

Additionally, when asked about what areas of work have increased in volume, new regulations and laws requiring policy refreshes and headcount topped the list, with 74% listing this as an area of increased work. Comparatively, the quantitative survey asked respondents to rank the top five areas that require the most time from legal departments; 26% included compliance monitoring and 25% said regulatory investigations.

But all this regulatory chaos presents its own risk. Policy refreshes don’t just mean new rules — they also mean deleting the old ones at breakneck speed. Any legal team that prepped for an onslaught of new regulations faces the new compliance nightmare of dealing with evaporating rules.

Blunting these concerns is the continued existence of the overseas markets committed to running 21st-century economies even while Trump wants to party like it’s 1899 when child labor was booming and tariffs fueled America’s routine financial panics.

ESG: From Compliance Risk to Political Target

Environmental, Social, and Governance compliance rated as a top-five legal risk​ for respondents, with more than 35 percent placing it in the top tier. According to the report many expected the area to remain a complex, moving target with investors maintaining pressure upon companies to live up to their pledges while noting some nascent pushback.

As a result, there is no way to fully ensure readiness. Another general counsel explained, “We are getting better and continue to hire outside specialists in recognition of the need to improve. Most organizations are prepared…However, we are starting to see a backlash against ESG…if you recognize something other than a commercial or economic value, you are not necessarily acting in the best interests of your shareholders.”

That pushback since transformed into a tidal wave, with Trump and his allies not only railing against domestic ESG — particularly when it comes to diversity — but hinting at cracking down on European-driven initiatives. Back in the summer of 2024, in-house counsel worried about getting grilled over greenwashing or inadequate disclosures and now they’re falling all over themselves to publicly declare their rejection of the most modest of diversity commitments.

It’s an inversion of corporate risk. Companies that previously feared liability for not doing enough on ESG now risk scrutiny for doing too much.

It was already a moving target, now it’s more Whac-a-Mole as law departments face corporate governance strategies that were best practice six months ago becoming potential legal liabilities.

Investigations: The Unexpected Pivot

The report identifies internal investigations as one of the most time-consuming and high-risk areas for legal teams​. Nearly one-third of GCs reported a rise in disputes and civil litigation, while 35 percent flagged internal investigations as the top trigger for legal action​.

But the anticipated drivers of these investigations — whistleblower complaints, regulatory scrutiny, fraud — are being reconfigured under the new administration. White-collar criminal enforcement barely made it past the loading screen of Pam Bondi’s tenure as Attorney General. Corporate fraud and foreign bribery no longer warrant DOJ bandwidth, though companies may have to buckle up for federal probes to defend how every Black employee on the payroll got their jobs.

The General Counsel Report 2025 isn’t much of a roadmap at this point as much as a faded treasure map leading straight into a booby-trapped regulatory hellscape. But it does highlight that the biggest challenge for in-house counsel right now is agility. Between the radical shift in priorities and the administration committing to a speedrun to reverse decades of regulatory framework (courts and statutes be damned), corporate legal has to move fast. While slashing regulation might sound like it takes a load off corporate legal, the sudden absence of guardrails is just as much a legal migraine — especially when the rest of the world isn’t racing to see how fast they can torpedo corporate governance.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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Goldstein, the Supreme Court litigator charged with a number of tax and fraud claims stemming from an alleged second life as a high-stakes poker fiend, will resume his prior scheduled release with several additional caveats covering his use of electronic devices. IPPC, which is like ExamSoft but for proctoring pretrial defendants, will have its software installed on his devices to remotely monitor his computer activity. He will also have to report all cryptocurrency wallets he “owns, has access to, and/or controls” including “hard wallets and soft wallets” (whether it’s stored on hardware or software for the folks unfamiliar with fake money).

The focus on cryptocurrency is the story of Goldstein’s week, having gone to jail after prosecutors deemed him a flight risk upon discovering some $8 million in crypto and transfers involving $6 million of it all while he was pleading poverty as a pro se in an effort to convince the court to let him use his house — which the indictment identifies as a product of mortgage fraud — to hire lawyers.

Now represented by Munger Tolles, Goldstein argued that those wallets didn’t belong to him and the government couldn’t prove he did anything but send money to them in the past. Emails like “tom need to wire USDC to me, please give him a address,” Goldstein argued do not establish that he owned the wallets involved in these transactions and, if anything, proved that he didn’t because — basically — “If Mr. Goldstein shared ownership of the wallet, then
there would have been no need for the individual requesting the payment to instruct [REDACTED] to ‘give’ Mr. Goldstein ‘a address’ to send the payment.”

That proved enough for Chief Magistrate Judge Timothy Sullivan to grant Goldstein’s release with assurances that no one would be blindsided by additional crypto transactions. It goes without saying that the revised order includes an edict that the defendant not “access, receive, send, and/or transfer any cryptocurrencies.”

But, for now, Goldstein will have to put off any nascent jailhouse lawyer aspirations.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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Yesterday, an appeals court upheld Scott’s conviction and sentence, rejecting Scott’s claims that he was unaware of the nature of the OneCoin fraud.

Scott left his international mergers and acquisitions and private equity practice in Biglaw to work at OneCoin, and prosecutors say he had a key role in the plot to launder $400 million from the cryptocurrency. According to the government, Scott created shell companies, offshore accounts, and fraudulent investment funds on behalf of OneCoin to launder money in what has been described as, “classic Ponzi scheme with no blockchain or real underlying technology.”

Prosecutors said Scott made bank for his role at OneCoin, even bragging about making $50 million before he was 50 years old. U.S. Attorney Damian Williams said, “Indeed, Scott accomplished his goal, but by fraud and deception, and will now spend a decade in prison and has been ordered to forfeit all of his illegal proceeds.”

In 2017, as the scheme was unraveling and the investigation into OneCoin was heating up, “Cryptoqueen” Ruja Ignatova (the founder of OneCoin) disappeared after boarding a plane to Athens. Theories have circulated that Ignatova was murdered on the orders of Hristoforos Nikos Amanatidis, known as Taki, an underworld figure also linked to Ignatova’s escape. She remains on the FBI’s 10 most wanted list, and the agency has said they operate on the assumption Ignatova is alive.

Kathryn Rubino is a Senior Editor at Above the Law, host of The Jabot podcast, and co-host of Thinking Like A Lawyer. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter @Kathryn1 or Mastodon @Kathryn1@mastodon.social.

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During that trial, Trump had repeatedly disparaged court personnel, including the judge’s law clerk. After the judge entered a gag order to protect the courtroom staff, Trump went outside the courtroom and told reporters that “a person who’s very partisan [is] sitting alongside” the judge. This appeared to again disparage the judge’s clerk and thus to violate the gag order. Judge Engoron had Trump take the witness stand.

Trump testified that he had not in fact been referring to the judge’s clerk as being a partisan, but rather was referring to Michael Cohen, Trump’s former lawyer, who had been on the witness stand at the time.

This was obviously a lie, and the judge ultimately so ruled: “The idea that the statement would refer to the witness doesn’t make any sense to me.” According to the judge, Trump’s testimony, under oath, was “not credible.”

Lying under oath. That’s not good. In the 1990s, Republicans wanted to impeach President Bill Clinton for lying under oath.

But I digress.

In the days leading up to January 6, 2021, President Trump urged his supporters to come to Washington, D.C., telling them that the day would be “wild.” Trump gave a speech on the sixth, and the assembled crowd attacked the Capitol Building. Whether or not you agree that Trump instigated the riot, he indisputably remained silent for three hours while a mob attacked Congress. Whether Trump thought the crowd consisted of members of Antifa, or FBI informants, or simply peaceful protestors, Trump did not lift a finger or say a word to defend the Capitol Building. A simple statement would have sufficed. Perhaps: “If you by any chance are my supporters, please understand that I didn’t mean this at all. You misunderstood me. I didn’t mean that you should ransack the Capitol Building. Please go home.”

But no.

Trump is not one to protect the United States to the best of his ability. Nor, as Judge Engoron held, is Trump one to tell the truth, even when under oath.

Today at noon, Donald J. Trump put his hand on a bible and repeated under oath the words set forth in Article II, Section One, Clause 8 of the Constitution:

I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States.

That doesn’t give me a whole lot of comfort.

How about you?

Mark Herrmann spent 17 years as a partner at a leading international law firm and later oversaw litigation, compliance and employment matters at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Drug and Device Product Liability Litigation Strategy (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

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The correct answer is Donald Trump’s defense team, whose client managed to embody ALL of that criminal activity (and more!) and slide right out of it unscathed. And sucking up to lawyers with the president’s ear when it comes time to beg for a pardon is at least as useful as writing an obsequious essay in the New York Times about winning Wisconsin being basically the same as an acquittal.

Supreme Court litigator and SCOTUSblog co-founder Tom Goldstein found himself on the wrong end of a harsh criminal indictment yesterday. The allegations of high stakes gambling, $15+ million in personal debts, and paying four mistresses from the firm coffers approached “Wayne Brady on Chappelle’s Show” levels of surprising pimp turns. Josh Blackman has a piece in the Volokh Conspiracy today comparing Goldstein’s oral arguments before the Supreme Court with the timeline of the indictment and suggests that he was losing millions and then turning around and arguing twice before the Supreme Court in the course of a month all while juggling multiple relationships and, folks, this is what peak performance looks like.

Facing all these charges, the self-professed Democrat — as of his NYT essay arguing that the criminal justice system should yield to the Electoral College — ran right to Trump’s team.

View the original article to see embedded media.

Lauro and Kise, probably the only personal Trump lawyers who aren’t expected to take over the Justice Department, successfully ran out the clock on Trump’s various criminal cases. While Kise stumbled in the New York hush money case, it didn’t matter when the court sentenced Trump to the criminal justice equivalent of a divorced dad handing his kid two bottles of Jack and the keys to his car. Meanwhile, in the D.C. interference case, the Supreme Court delivered a solid for the team in rewriting the Constitution to retroactively legalize coups and in the Florida classified documents case Aileen Cannon did Aileen Cannon stuff. All in all, a pretty successful run.

Which is not necessarily a knock on their lawyering skills in a straight up litigation — it’s comically clear Kise wasn’t in full control of the New York case — but as they say, good lawyers know the law and great lawyers know someone with federal pardon power.

Making this — if the indictment is to be believed — the best bet Goldstein’s made in awhile.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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Where to even begin with this thing? It’s really like Rounders in reverse except Teddy KGB has names like “California Businessman-1” and “Law Firm-2.”

Over the course of several years, the indictment says that Goldstein racked up big winnings and bigger losses in high-stakes underground domestic and international poker matches. By the time of the alleged loan fraud, the feds say Goldstein was around $16 million in the hole and failing to disclose that. And while he didn’t report all his gambling income, a good deal of the tax problems revolve around using the firm, Goldstein & Russell, as a piggy bank to move money from firm coffers to pay personal gambling debts.

And, just for good measure, the indictment includes some extra personal and financial shenanigans:

Paying four affairs while working with your wife… gotta say this has a real “Behind The Music” feel to it and man there are some storm clouds are on the horizon here.

Also, the infamous if apocryphal Biglaw memo where a partner asked a young lawyer to write a lengthy memo of local lunch options is now officially the second most lawyerly nonsense memo ever:

View the original article to see embedded media.

You can check out my liveblog of my initial reading of the indictment here.

Across 50 pages, the indictment describes heads up games in Macau, interfirm deals to use fees to offset debts, helping an actor get a Texas billionaire to pay up, using a litigation funder to cover losses, and crossing the border with a duffel bag filled with $968,000.

And here we thought writing comical letters to porn stars threatening to sue was Goldstein’s wild side.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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After wresting three postponements from the court, including one in September because it would be “political interference” to sentence him while people were voting, Trump immediately pivoted and claimed it would be “political interference” to sentence the president-elect.

His lawyers John Sauer (the future solicitor general) and Todd Blanche (the future deputy AG) made bizarre claims of “president-elect privilege” that attaches during the transition.

Sitting-President immunity extends into the brief transition period during which the President-elect prepares to assume the Executive Power of the United States, and the courts thus lack authority to adjudicate criminal claims against him.

They demanded an immediate stay to appeal the denial of their motion to disappear the verdict because it was secured using official acts evidence. And they spent the past week racing from court to court in an effort to stop their client from facing a modicum of responsibility.

But they got out-maneuvered by Justice Juan Merchan, who made the sentencing so un-burdensome that they had functionally nothing to complain about. The promised punishment of unconditional release, along with a dispensation to appear virtually, cut the legs out from under their claim that wasting even a second of Trump’s precious time during the transition compromised national security.

Sentencing a President during his transition “creates a constitutionally intolerable risk of disruption to national security and America’s vital interests.” And if anything is to be taken from the trial court’s decision to let President Trump appear virtually and its indication that it will not incarcerate him, it is that everyone agrees there are such risks. But letting the sentencing go forward sets the precedent that those are permissible risks.

Trump filed emergency motions with the First Judicial Department and the New York Court of Appeals, before finally belly flopping onto the steps at One First Street demanding that his pals bail him out. But just this once, the answer was “no” … barely.

The application for stay presented to Justice Sotomayor and by her referred to the Court is denied for, inter alia, the following reasons. First, the alleged evidentiary violations at President-Elect Trump’s state-court trial can be addressed in the ordinary course on appeal. Second, the burden that sentencing will impose on the President-Elect’s responsibilities is relatively insubstantial in light of the trial court’s stated intent to impose a sentence of “unconditional discharge” after a brief virtual hearing. Justice Thomas, Justice Alito, Justice Gorsuch, and Justice Kavanaugh would grant the application.

(Did Justice Kavanaugh also get some personal attention from the president-elect, or was that just Alito?)

And so the once and future president whined and sighed his way through the sentencing hearing this morning, complaining that all the legal scholars at Fox know the charges were bullshit, and no one had ever been treated as badly as him. WITCH HUNT!

View the original article to see embedded media.

And then the once and future President Crimetime loped off to take comfort in all the Republican governors who trooped down to Mar-a-Lago to kiss his ring.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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In New York, Trump demands that his sentencing be adjourned so he can pursue an interlocutory appeal of the denial of his motion to dismiss on immunity grounds. He insists that the conviction for creating false business records to cover up a hush money payment rests on official acts evidence, and thus he is entitled to an automatic stay until 2029 (or preferably never). Alternatively, his lawyers John Sauer and Todd Blanche have invented a theory of president-elect immunity that they can just about argue with a straight face.

So far, they’re not getting any takers. Justice Merchan just rolled his eyes, after which Trump filed an filed an emergency petition with the New York’s Appellate Division, which was summarily rejected by Associate Justice Ellen Gesmer after a brief hearing on Tuesday. Trump then made a token feint in the direction of the New York Court of Appeals before racing to SCOTUS and demanding that it enjoin his sentencing, which is currently scheduled for Friday morning.

“Forcing President Trump to defend a criminal case and appear for a criminal sentencing hearing at the apex of the Presidential transition creates a constitutionally intolerable risk of disruption to national security and America’s vital interests,” vamped future Deputy AG Blanche and future solicitor general Sauer. “By contrast, the State of New York’s asserted interest in proceeding with the criminal sentencing of the President-Elect of the United States on politically motivated charges at breakneck speed at the apex of a Presidential transition should be accorded no weight.”

They blame the trial court for the last-minute filing, omitting to mention that Trump himself demanded three delays of sentencing, which was originally scheduled for July, and then waited three weeks after Justice Merchan rejected his immunity claims to assert said “automatic” stay: “Because it is highly questionable whether the New York Court of Appeals will act in the next 48 hours, filing applications in both courts appears to be the only viable option.”

Justice Sotomayor, who fields emergency requests from New York, has given District Attorney Alvin Bragg until 10 a.m. Thursday to respond. Then we’ll find out if the Supreme Court’s six conservatives want to hang Trump v. People of New York next to Trump v. US on its wall of shame before the outrages of the next four years even get underway.

Meanwhile in Florida, Judge Aileen Cannon purported to stay the release of the special counsel report, despite apparently lacking jurisdiction over the documents case. Trump’s dimwit henchmen, Walt Nauta and Carlos De Oliveira, simultaneously filed in the Eleventh Circuit, where they bizarrely asserted rights under the Presidential Transition Act and the Executive Vesting Clause. This may have something to do with the fact that at least one lawyer representing them, Stan Woodward, is headed to a job in the upcoming Trump administration.

The Eleventh Circuit, which does have jurisdiction, gave the DOJ until this morning to respond. And so today the government warranted that it will not be publicly releasing Volume 2 of the Special Counsel report detailing Trump’s efforts to steal government records and hide them in his pool locker until such time as the pending case against the dimwit henchmen is resolved.

“The essential premise of defendants’ emergency motion—that, absent this Court’s intervention, ‘Attorney General Garland is certain to make [the Final Report] immediately public’ and thereby cause irreparable prejudice to defendants’ criminal proceedings (Mot. 1)—is thus mistaken,” the prosecutors write, adding that “Defendants Nauta and De Oliveira have no cognizable interest in that volume of the Final Report, however, nor any plausible theory of Article III standing that would justify their asking this Court to grant relief with respect to it.”

This highlights the absolute insanity of allowing a trial judge who dismissed the case to order the DOJ to do anything at all, much less retain jurisdiction over the Justice Department for three days after the Eleventh Circuit’s disposition of the emergency motion.

“To avoid the potential need for further emergency litigation in this Court, the United States respectfully requests that this Court make clear in denying the motion that its resolution of this question should be the last word (absent review by the en banc court or the Supreme Court),” the DOJ notes pointedly. “The United States respectfully requests that, if this Court agrees that no injunction against the Attorney General is warranted, the Court should say so in an order binding on the district court and vacate the district court’s temporary injunction.”

Nauta and De Oliveira offered to respond to the DOJ’s motion by 10 a.m. tomorrow, only to be told that they can get their homework in by 5 today. Will they be asserting henchmen-to-the-president-elect privilege?

Probably!

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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“Dangerous rhetoric is not a welcome form of argument and will have no impact on how the Court renders this or any other Decision,” Justice Merchan wrote.

Yesterday, Blanche and Bove, who are soon to be leading the Justice Department, threw up two middle fingers to the court again, describing “grave constitutional problems with this proceeding raised in our prior pleadings, including forcing a jury on the Defendant in record time and without proper process.”

Screeching about a “politically-motivated prosecution that was flawed from the very beginning, centered around the wrongful actions and false claims of a disgraced, disbarred serial liar former attorney, violated President Trump’s due process rights, and had no merit,” they added that “While it is indisputable that the fabricated charges in this meritless case should have never been brought, and at this point could not possibly justify a sentence more onerous than that, no sentence at all is appropriate based on numerous legal errors—including legal errors directly relating to Presidential immunity that President Trump will address in the forthcoming appeals.”

So much for decorum.

In today’s nastygram, Blanche and Bove demand that the court stay all proceedings under Trump v. US to allow their client to take an immediate appeal. As per usual, the pleading is a bit muddy on the facts and the law. In fact, this is not a response to last week’s ruling, in which the court refused to adjourn sentencing based on retroactive presidential immunity that extends backward into the presidential transition period — or at least, not really. Trump does demand an automatic stay to litigate the claim of “absolute sitting-President immunity from criminal process, extended to the President-elect.” But his main claim is that he’s entitled to a post-trial stay to appeal Justice Merchan’s December refusal to vacate the conviction because it rested on evidence of official presidential acts, which should have been excluded.

Blanche and Bove go to great lengths to fudge the line between being charged for official conduct and being convicted of non-official conduct based on evidence of official acts. Justice Merchan ruled that those claims were: untimely, because raised too late; incorrect, because the presumption of immunity was overcome; and irrelevant because the evidence of Trump’s guilt was overwhelming and so inclusion was harmless error.

In essence, Trump isn’t making an immunity claim, he’s making an evidentiary one. This may be a distinction without a difference — the law is whatever the Supreme Court says it is, and these days that’s a moving target. Moreover, the purpose of a pretrial stay to litigate immunity is to spare officials from the burdens of trial — which is wholly irrelevant at this juncture. But Blanche and Bove bluster their way through it, huffing that “undergoing a criminal sentencing is the most extreme example of ‘hav[ing] to answer for his conduct in court,’ — exactly what the doctrine of Presidential immunity forbids and why an automatic stay is mandated.”

A cynical person might suggest that Trump’s lawyers had gamed the system by not appealing the immunity ruling in December when it was issued, instead waiting until the last possible second to seek review in hopes of running out the clock. That person might also note the inherent tension between the claims that it violates presidential immunity to force Trump to litigate criminal appeals after he’s sworn in, and the demand that sentencing be stayed to allow him to litigate his criminal appeals.

Trump demanded a response from the court by 2pm, warning that he’ll “file an Article 78 proceeding as well as a direct appeal in the Appellate Division, First Department, seeking review of the Court’s two recent incorrect rulings on Presidential immunity” if he doesn’t get his way. As of this writing, neither Justice Merchan’s response nor any appeal has hit the public docket.

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The motion to dismiss was packed with the usual hyperbole and ad hominem attacks from attorneys Todd Blanche and Emil Bove, who will soon be running the Justice Department.

“No President of the United States has ever been treated as unfairly and unlawfully as District Attorney Bragg has acted towards President Trump in connection with the biased investigation, extraordinarily delayed charging decision, and baseless prosecution that give rise to this motion,” they bloviated.

At bottom, they objected to testimony by Trump’s White House aides, Hope Hicks and Madeleine Westerhout, along with the introduction of a federally mandatory financial disclosure and several tweets issued while Trump was in office. These violate the Supreme Court’s ruling in Trump v. US that evidence of official acts must be excluded to ensure that the president acts boldly and without fear that he’ll go to jail for doing crimes, they insist. They largely failed to lodge these objections at trial, however, suggesting that they did not anticipate the Supreme Court being crazy enough to buy what they were selling. (Oh ye of little faith!)

But Blanche and Bove aren’t just nasty. They’re creative, too! So they had several interesting theories why their untimely objections should carry the day. Maybe Trump v. US required a special hearing on immunity claims, and the lack of one constitutes a mode of proceedings error that does not require preservation. Maybe they refrained from objecting too much “to avoid antagonizing the court or testing its patience,” and so Justice Merchan should be a pal and treat those objections as if they’d been timely lodged. Maybe presidential immunity is a superpower that trumps all others.

Justice Merchan was not persuaded, and he noted that “the Trump Court” (cough) took pain to affirm that it wasn’t murdering all prosecutions of former presidents in their cribs, but rather setting out a rubric to separate official from unofficial conduct:

In attempting to assuage the concerns expressed by the dissent, Chief Justice Roberts succinctly clarified the majority’s holding. “As for the dissent, they strike a tone of chilling doom that is wholly disproportionate to what the Court actually does today – conclude that immunity extends to official discussions between the President and his Attorney General, and then remand to the lower courts to determine ‘in the first instance whether and to what extent Trump’s remaining alleged conduct is entitled to immunity;” the Trump Court expressly indicating that its holding is no broader than that.

And so Justice Merchan took the Court at its word, finding that “the evidence related to the preserved claims relate entirely to unofficial conduct and thus, receive no immunity protections.” Rejecting the mode of proceedings argument, Justice Merchan noted that US District Judge Alvin Hellerstein conducted a fact-based review pursuant to Trump’s first federal removal petition and concluded that covering up a hush money payment to a porn star by dummying up fraudulent invoices to your lawyer was not official conduct. And so, Justice Merchan reasoned, “It is therefore logical and reasonable to conclude that if the act of falsifying records to cover up the payments so that the public would not be made aware is decidedly an unofficial act, so too should the communications to further that same cover-up be unofficial.”

The court added that, even if the evidence adduced at trial were official in nature, their introduction “poses no danger of intrusion on the authority and function of the Executive Branch.”

And finally, if all the above was wrong, then it was harmless error since there was so damn much evidence against Trump that it wouldn’t have made any difference.

As of this writing, there is still a pending Motion to Dismiss Based on Various Previously Rejected Theories and Also I WON THE ELECTION. There’s also some rumbling from the defense about juror misconduct. It’s not clear what that involves, although the judge characterized it as a letter from the defense which “consists entirely of unsworn allegations.” That should appear on the docket in the next few days, if only in redacted form.

This case is hanging on by a thread. But it is hanging on.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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Leech’s process went something like this. Like certain other highly successful septuagenarian bond gurus, he lives in California. So he gets up bright and early—5 a.m. West Coast time—and places a few dozen trades in the early hours of the trading day back east.

Now, the rules at Western Asset Management, where he served a co-CIO, require fund managers to allocate those trades right away. Unless that fund manager was Ken Leech. In that case, the procedure involved Leech’s brokers sending trade confirmations to WAMCO, the trading assistant in receipt of them frantically calling Leech to find out which of his three funds the trades were going to, Leech being on a long lunch or having a swim or whatever and not responding until just around market closing time, when he would then discuss with the harried assistant which trades went where.

 By then, of course, Leech would have a pretty good idea of how the bonds he bought and sold had performed that day. And wouldn’t you know it, but the most successful of a day’s trades had a strong tendency to wind up in his flagship Macro Opportunities fund rather than in the other two. You know, the Macro Opps in which he’d boosted his owned deferred compensation stake while cutting it in the other two, the same Macro Opps fund whose fee structure generated so much more revenue for WAMCO than the other two, with half of the profit produced by that revenue going straight into Leech’s pocket.

How strong a tendency?

Statistically, the probability that these differences in first-day returns occurred by random chance is less than one in 1 trillion….

Well, that’s simply too much of a coincidence—actually about 17,000 coincidences—for WAMCO, the Securities and Exchange Commission and the Justice Department to ignore. Especially since those “coincidences” seem to have started just when Macro Opps hit a rough patch, with bad bets on interest rates, Russian debt and Credit Suisse combining with outflows to drive the fund’s assets down by 80%—and Leech’s bonus by a quarter or more with it. And wouldn’t you know it, but once the Feds started looking at those coincidences, coincidentally trades with $600 million in first-day gains would up in Macro Opps, and trades with $600 million in first-day losses wound up in the other two.

Quite a series of coincidences!

Now, Leech’s lawyer says all of the stuff in the SEC lawsuit and fraud indictment is nonsense. That being said—and given the odds involved—he doesn’t actually deny that Leech sent the good trades one way and the bad ones the other way, hours after they were made, in contravention of company policy and best practices everywhere. It’s just that doing so didn’t matter.

“These unfounded allegations ignore key facts, including the fundamental differences between distinct fixed-income strategies and the irrelevance of first-day performance to managing these strategies. Mr. Leech received no benefit from the alleged misconduct,” the statement said.

Still, less than one in a trillion! If it didn’t matter, why was he (allegedly) doing it?

Leech Shunted $600 Million to Favored Portfolios, US Claims [Bloomberg via Yahoo!]
Federal Prosecutors Charge Star Bond Investor Ken Leech With Fraud [WSJ]

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On that day, you should consider what life choices brought you to that point. Because lawyering can be unpleasant but dealing with this case must have been unbearable!

Kevin Underhill’s Lowering the Bar has details on a California Department of Insurance investigation dubbed “Operation Bear Claw” designed to get to the bottom of a series of insurance claims involving a bear roaming a well-to-do area of Los Angeles and ripping up the inside of a Rolls Royce and a pair of Mercedes to the tune of $141,839. The insurance companies involved apparently dragged the government into the inquiry as they stared at surveillance footage and wondered… maybe that’s not a real bear?

Bear with me for a second here. The insurance claims involved three separate ursine attacks upon three different cars at the same location, all made upon different insurance companies. That seems… curious.

The government thought so too and ran the footage by a biologist who was pretty sure this was a human in a bear suit. That proved enough to get a search warrant. Which, as investigative techniques go, is more straightforward than setting up a Honey Pot. Returning to Lowering the Bar’s coverage:

That (plus the biologist) was enough to get a search warrant, and if you assumed these suspects would have disposed of the bear costume after using it to commit three crimes rather than keeping it at home, you must be new here:

Four people have been arrested. I guess, in light of this costume, they lacked any pawsible deniability.

Insurer Thinks Bear Shown in Video Trashing Car Looks a Lot Like a Guy in a Bear Suit [Lowering the Bar]

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

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According to [mutual fund manager] Holbrook [Holdings], Cohodes, who has over 172,000 followers on X under the handle @AlderLaneEggs, has posted about the company numerous times, leveling insults such as calling Holbrook’s CEO an “asshat” and calling Holbrook’s mutual fund a “bag of shit.”

The shit in that bag, according to Cohodes, are unsecured baby bonds issued by the boutique investment bank B. Riley, currently embroiled in the scandal around the now-bankrupt Franchise Group. But the allegedly shady shit around that B. Riley-backed buyout isn’t the only thing that stinks about the bank, according to Cohodes, who claims Holbrook bought the now allegedly worthless bonds as part of a backroom deal with B. Riley, which he says agreed to sing the mutual funds’ praises to its deep-pocketed clients. 

Holbrook says that all of those allegations are the real bag of shit, and it’s now suing the short-seller.

“Cohodes simply fabricated outrageous and inherently damaging allegations out of whole cloth in order to punish Holbrook for having the temerity to question [his claims about B. Riley],” the lawsuit reads…. Holbrook in its lawsuit pointed out that since its inception, neither Holbrook nor any of its “advisory affiliates” have ever been found to have violated any SEC, CFTC, or other federal agency regulations or statutes. Nor has Holbrook or any of its advisory affiliates ever been the subject of a disciplinary order by the SEC, the CFTC, or any state regulatory agency./Holbrook alleges that Cohodes’s actions have caused it to suffer at least $5 million in reputational harm via a loss of revenue.

A careful reader of Cohodes’ allegations against Holbrook will show that he hasn’t exactly said that the mutual fund company is under SEC investigation or that it’s been subject to an SEC disciplinary order. He’s merely said that it should be, and he’s doing his best to make sure that it is.

He said he has also spoken to the SEC about Holbrook…. On Sept. 16, counsel for Holbrook sent Cohodes a letter demanding a retraction of his false accusations about the company, including the claims that Holbrook’s investment strategy violated SEC rules, that Holbrook had engaged in a kickback scheme with B. Riley, and that Holbrook was involved in any fraudulent conduct with regard to B. Riley.

In early October, Cohodes did the Hedgeye Investing Summit and repeated the allegations, according to Holbrook.

Cohodes, for his part, would be only too happy to repeat them again—on the stand.

Cohodes reacted defiantly to the lawsuit on Friday, saying that not only has he won similar suits in the past but plantiffs have had to pay his legal fees.

Holbrook sues famed short-seller Cohodes over B.Riley allegations [Alternatives Watch]

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No, what especially jumped out at us in the case of the United States v. Justin Murphy is this:

Murphy has also been accused of providing investors with account statements that falsely represented their account balances as well as federal tax forms that falsely reported business income for which the investors would need to pay taxes.

(Allegedly) ripping your investors off both in the usual way and also by making them pay taxes on returns that didn’t exist? Pure perfidious poetry. Not that Murphy is owning up to any of the offenses laid at his feet, although it must be said he wasn’t particularly eager to answer them in court.

He was extradited from Brazil where he had been detained since December…. A federal grand jury in New Haven had returned the indictment in 2022….

Stamford man bilked $3.5 million from clients of his Greenwich hedge fund, documents show [Greenwich Time]
CT investor apprehended in Brazil pleads not guilty to stealing $3.5M in hedge fund scheme [Hartford Courant via Yahoo!]

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“We are going to be awarding a million dollars randomly to people who have signed the petition, every day from now until the election,” he vamped, adding later that the only “ask” was that recipients be good spokespeople for the PAC.

BREAKING: Elon Musk makes a big announcement. America PAC will now be giving away $1 million everyday to one random person who signs the petition until the election day. pic.twitter.com/oE3mCddFxp

— DogeDesigner (@cb_doge) October 20, 2024

That turned out to be less than 100 percent true, as became immediately apparent when the “winners” just so happened to be present at Pennsylvania rallies to collect their prizes later that week. But in case there was any doubt, Musk’s lawyer Chris Gober confirmed it yesterday morning in a hearing before Judge Angelo Foglietta of the Philadelphia Court of Common Pleas on the civil complaint seeking to enjoin Musk from continuing to operate an illegal lottery.

“There is no prize to be won, instead recipients must fulfill contractual obligations to serve as a spokesperson for the PAC,” Gober protested, seemingly defending his client from charges that he was running an illegal lottery by admitting that he was engaged in fraud.

“The opportunity to earn is different from the chance to win,” Musk’s consigliere Chris Young told the court.

According to the Philadelphia Inquirer:

Gober acknowledged that Musk used the word “randomly” in his speech. But he said that was not meant to suggest that winners’ names would be drawn from a blind pool, as occurs in a lottery or other game of chance — but that the method for choosing winners would be random because it wasn’t going to follow any pre-determined pattern or criteria.

“We just heard this guy say, my boss, my client, called this random,” gaped John Summers, the lawyer representing Philadelphia District Attorney Larry Krasner. “We promised people that they were going to participate in a random process, but it’s a process where we pre-select people.”

This would appear to confirm the DA’s argument in his complaint that, if Musk wasn’t running an illegal lottery, he was violating Pennsylvania’s consumer protection statute:

To be clear, it would be no defense for America PAC and Musk to argue that it was not engaging in a lottery if their scheme actually did not involve a chance or random selection of winners. In that event, (a) they would be admitting to acting deceptively and in violation of the Commonwealth’s consumer protection law; and (b) they would still be in violation of the Commonwealth’s prohibition against the operation of unlawful lotteries.

And indeed the petition itself seems to have gone through several revisions in an attempt to square with the mad king’s demands with the provisions of state law. In its current iteration, it refers to the recipients as “earning” their checks and requires them to provide “a signed IRS W-9 so an IRS 1099 can be issued.”

But as Krasner noted when he took the stand, “That doesn’t sound like a spokesperson contract.”

The hearing was highly contentious, with Summers calling Musk’s lawyers “fraudulent shysters” at one point, only withdrawing the “shysters” after being reprimanded by the judge.

Krasner's team is going after Chris Young, Elon's top political aide, for NDAs that require the $1 million winners to not talk about them.

Young says that every vendor to Amercia PAC signs an NDA — and that he himself has one.

"I don't give a hoot," Krasner team shoots back.

— Teddy Schleifer (@teddyschleifer) November 4, 2024

As of this writing, Judge Foglietta had not yet ruled. And for the purposes of the injunction, any order is functionally moot. This is the final day before the election, and Musk’s people have said that the only remaining “earner” will be from Michigan, not Pennsylvania. But to the extent that Musk’s henchmen dropped him in the criminal soup, forced to admit to actual crimes on the witness stand after the billionaire refused to show up, the fun may be just beginning.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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Background

The modern corporate in-house counsel faced significant criticism during the early 21st century in the wake of scandals that involved the collapse of corporate giants like Enron and WorldCom. The failures of in-house lawyers during this period were largely the result of their inability to effectively serve as ethical gatekeepers, a responsibility that should have helped prevent the fraudulent activities that led to these catastrophic corporate downfalls.

The Wave Of Scandals

Enron’s collapse was a result of widespread fraud, particularly through the manipulation of accounting practices and the creation of off-balance-sheet entities to hide debt. The in-house lawyers at Enron failed in several critical ways:

• Failure To Challenge Questionable Practices. Despite clear evidence of unethical and illegal practices, such as the creation of complex financial structures designed to mislead investors and regulators, the in-house lawyers did not take meaningful steps to challenge or stop these practices. In fact, the in-house lawyers often worked to facilitate these schemes, interpreting the law in ways that allowed the company to conceal its financial problems.
• Conflicted Loyalties. The general counsel (GC), as a senior executive, had a duty to the board and shareholders to protect the integrity of the company. However, the GC at the time appeared to prioritize the interests of the CEO and other senior executives over the interests of shareholders and the company’s long-term health, creating a conflict of interest.
• Ethical Blind Spots. The in-house lawyers failed to recognize or act on the broader ethical implications of the company’s actions, focusing on legal technicalities rather than the spirit of the law or the company’s ethical responsibilities.

WorldCom’s scandal involved the fraudulent inflation of assets by $11 billion, which led to the largest bankruptcy in U.S. history at the time. The failure of WorldCom’s in-house lawyers highlighted similar issues:

• Lack Of Oversight. WorldCom’s in-house lawyers failed to establish or enforce appropriate oversight mechanisms within the company where the fraud was taking place.
• Failure To Protect Whistleblowers. Employees who had suspicions about WorldCom’s financial practices found little support from the in-house lawyers who were responsible for ensuring that whistleblower protections are enforced. This lack of support contributed to a culture of silence, which allowed the fraud to grow unchecked.

The Enron and WorldCom cases were emblematic of a broader crisis of corporate governance, where in-house lawyers failed in their role as ethical stewards. Several common factors contributed to these failures:

• Overemphasis On Legalism Over Ethics. In-house lawyers during this era tended to focus on what was legally permissible rather than what was ethical or in the best long-term interest of the company and its stakeholders. Many of the financial maneuvers used by companies like Enron, WorldCom, and others might have been legally defensible but were deeply unethical and unsustainable.
• Weak Or Compromised Independence. In many companies, in-house lawyers were heavily influenced by the executive team and did not have the independence necessary to stand up to improper or unethical demands from CEOs or CFOs. This compromised their ability to serve as independent guardians of corporate integrity.
• Lack Of Communication With The Board Of Directors. In-house lawyers often failed to adequately communicate legal and ethical risks to the board, either because they were sidelined or because they downplayed risks in favor of short-term financial performance. In some cases, in-house lawyers were complicit in keeping boards in the dark about major red flags, such as significant off-balance-sheet liabilities or aggressive accounting practices.

Response To The Wave Of Scandals

The Enron and WorldCom scandals prompted the American Bar Association (ABA) to tighten its ethical rules by clarifying the in-house lawyer’s duty to the organization, strengthening reporting obligations, and emphasizing the in-house lawyer’s role in preventing corporate fraud.

Impact Of These Changes

Prevention Of Future Scandals. The ABA sought to prevent lawyers from becoming complicit in corporate fraud by imposing clearer reporting duties and enabling in-house lawyers to break confidentiality in certain cases.

• Increased Accountability. The ABA sought to hold in-house lawyers more accountable for addressing and preventing misconduct within organizations.
• Stronger Ethical Culture. The ABA’s rule changes were part of a broader movement toward enhancing the ethical culture within both the legal profession and corporate America, emphasizing transparency, integrity, and the in-house lawyer’s role as a gatekeeper.

In-house lawyers play a crucial role in driving business success, but they also bear the weighty responsibility of safeguarding the organization’s ethical integrity. While it is essential to support innovation and growth, the in-house lawyer has an ethical duty to protect the company, a duty that can never be compromised. In-house lawyers must always remain vigilant, ready to speak up when legal or ethical boundaries are crossed. When necessary, in-house lawyers must even speak out to ensure the organization’s long-term health and compliance. Staying grounded in the ethical rules is not just a professional obligation — it’s a critical safeguard for the organization and the lawyer’s career. Ultimately, failing to uphold these responsibilities could result in more than just a business failure — it could cost you your bar license.

If you are interested in hearing more on this topic check out Ethics for In-House Counsel: Navigating the Ethical Responsibilities of In-House Counsel to the Organization’s President, Board of Directors, and Employees, available only via IHC On Demand (with CLE!).

Lisa Lang is an in-house lawyer and thought leader who is passionate about all things in-house. She has recently launched a website and blog Why This, Not That™ (www.lawyerlisalang.com ) to serve as a resource for in-house lawyers. You can e-mail her at lisa@lawyerlisalang.com , connect with her on LinkedIn (https://www.linkedin.com/in/lawyerlisalang/) or follow her on Twitter (@lang_lawyer).

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It looked as if this request had met the same fate as pretty much all of his other requests to the legal system: SBF was sent off to Oklahoma City to await more permanent accommodations. A week later, the Bureau of Prisons—perhaps mindful that the judge the former crypto mogul would go on to call hopelessly biased against him had asked the Feds to pretty-please keep him at the MDC—returned SBF to the broken glass and moldy shower stalls alongside the Brooklyn-Queens Expressway.

Perhaps Bankman-Fried didn’t merely want to beaver away at a surely hopeless appeal during a sweltering summer at a jail whose HVAC system is as questionable as the alibis of many of its residents. Perhaps he had word that he might soon be sharing a sleeping space with someone who might well be among his all-time favorite artists.

Sean “Diddy” Combs has been moved to a section of the New York City jail where convicted cryptocurrency fraudster Sam Bankman-Fried is being held, sources confirm to NBC News.

The area of the detention center is reserved for detainees who require special protection…. The unit is described as a barracks-style area currently housing 18 to 20 inmates who require special protection, according to the sources, ranging from high-profile defendants to individuals who cooperate with investigations. It is considered general population in nature, but with added security.

Anyway, the women in Diddy’s life may yet send him up the river for quite a bit longer than the 25 years his new roomie got, and given the work of his lawyers so far, that seems more likely than the former rap mogul might like. Meanwhile, the woman formerly in SBF’s life, who helped get her ex-boyfriend/boss that quarter, will soon learn whether she’ll be joining them in Brooklyn’s least-desirable residential development.

On Tuesday afternoon, [Caroline Ellison] is set to find out if her cooperation with prosecutors will keep her out of prison…. Prosecutors and lawyers for Ellison have urged [U.S. District Judge Lewis] Kaplan to be far more lenient, citing her remorse and extensive cooperation with the criminal investigation. Her lawyers have asked the judge not to sentence her to prison….

“The Government cannot think of another cooperating witness in recent history who has received a greater level of attention and harassment,” prosecutors wrote to the judge.

Sean 'Diddy' Combs moved to same section of New York City jail housing as Sam Bankman-Fried [CNBC]
Caroline Ellison, Star FTX Witness Turned Romance Novelist, Learns Her Fate [WSJ via MSN]

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It was an odd maneuver, coming a year after Judge Alvin Hellerstein unceremoniously booted Trump’s first claim that he was doing official president stuff when he reimbursed Michael Cohen for the Stormy Daniels hush money payment and three whole months after the jury reached its verdict in the state case. The applicable statute says that removal should take place within 30 days of arraignment, although it does allow for later filing with permission of the judge for good cause shown. And indeed the filing was immediately kicked for being docketed without leave of the court.

Trump spox Stephen Cheung assured MSNBC’s Lisa Rubin that this was all a simple misunderstanding.

“In a standard procedural move, today, the clerk’s office asked President Trump’s legal team to file in a specific format and we are working with them to make sure it is properly filed on the electronic system,” he insisted.

This was sort of true, at least for a couple days. But this week, when the court reopened, Trump’s lawyers Emil Bove and Todd Blanche refiled their document attached to a breezy, two-page memorandum of law suggesting that there was very definitely “good cause shown” for removal, which Judge Hellerstein would know if he read the motion they filed last week.

This was perhaps a strategic error. Although in light of the brush off they got last year, it’s unlikely that a more deferential approach would have changed the outcome. The court was utterly unreceptive to the argument that Trump is entitled to federal removal because official acts evidence was wrongly admitted at his state trial, and/or Justice Juan Merchan is too biased to sentence him on September 18.

“This Court does not have jurisdiction to hear Mr. Trump’s arguments concerning the propriety of the New York trial,” Judge Hellerstein wrote dismissively.

“Instead, the proper recourse for parties seeking to remedy alleged errors made during a state trial is to pursue a state appeal or, at the highest level, to seek review from the Supreme Court of the United States,” he went on. “It would be highly improper for this Court to evaluate the issues of bias, unfairness or error in the state trial. Those are issues for the state appellate courts.”

As for Trump’s insistence that the immunity decision changes everything, the court scoffed that “Nothing in the Supreme Court’s opinion affects my previous conclusion that the hush money payments were private, unofficial acts, outside the bounds of executive authority.”

And so it’s on to the Second Circuit, where Trump has already docketed his appeal. He has not, however, moved to expedite it — at least as of this writing. Which means that it’s highly unlikely that he’s going to get relief in time to put off the sentencing he so dreads.

In the meantime, the District Attorney’s Office in Manhattan sent Justice Merchan a letter last week which was published to the docket on Tuesday. It reiterates that the state takes no position on his request to postpone his sentencing but observes that his constant bellyaching about it coming so close to the election is RICH considering that Trump himself spammed the court with garbage motions for two straight years.

We note that the concerns defendant expresses about timing are a function of his own strategic and dilatory litigation tactics: This second notice of removal comes nearly ten months after defendant voluntarily abandoned his appeal from his first, unsuccessful effort to remove this case; three months after he was found guilty by a jury on thirty-four felony counts; and nearly two months after defendant asked this Court to consider his CPL § 330.30 motion for a new trial.

They tactfully omit the month-long delay Blanche and Bove netted by falsely accusing the DA of withholding evidence on the eve of trial.

Pepperidge Farm remembers! Now let’s see if the Second Circuit remembers, too.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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In June of 2023, when Trump first sought to remove the case, Judge Alvin Hellerstein ruled that none of the underlying conduct related to his official presidential duties. But now Trump claims that the Supreme Court’s immunity ruling changes the landscape completely and entitles him to post-trial relief.

At first blush, it appears to be going poorly. The filing was automatically rejected on Friday evening because he had no right to file it.

Under 28 USC § 1442, a defendant charged with conduct taken “under color” of office may remove his case to federal court. But § 1455 specifies that removal should take place within 30 days of arraignment, “except that for good cause shown the United States district court may enter an order granting the defendant or defendants leave to file the notice at a later time.” Trump failed to seek such permission, and so he got summarily kicked.

“Contrary to the wishes of Radical Liberals, President Trump’s powerful petition to remove the Manhattan DA’s Witch Hunt to federal court has not been ruled on by a judge,” Trump’s spokesweirdo Stephen Cheung told MSNBC’s Lisa Rubin. “In a standard procedural move, today, the clerk’s office asked President Trump’s legal team to file in a specific format and we are working with them to make sure it is properly filed on the electronic system.”

Which is kind of true.

Yesterday morning, Trump tried again docketing a two-page memorandum of law in support of his motion for relief, that gestured toward “paragraphs 12 and 116 – 146 of the Second Removal Notice” and demanded that Judge Hellerstein punch his ticket — a punch which would itself have the desired effect of barring the court from sentencing their client, since § 1455 provides that “a judgment of conviction shall not be entered unless the prosecution is first remanded.”

The underlying argument is, shall we say, creative. Last year when he tried to convince the court that he’d been paying Michael Cohen $35,000 per month for actual legal work, Trump specifically disavowed any claim of presidential immunity:

DANY argues that there is a “serious question . . . whether a former President can claim absolute presidential immunity against criminal liability.” This Court need not decide this “serious question” for purposes of this motion because President Trump has not raised it in his removal notice.

Trump’s immunity claims with the trial court were similarly rejected for being untimely raised.

These are what you might call “bad facts.” And so Trump’s lawyers Todd Blanche and Emil Bove simply ignore them and shout that the judge and indeed the entire state of New York is BIASED. In fact, the filing is more notable for what it leaves out rather than what it includes.

There’s no mention of Judge Hellerstein’s conclusion last year that none of the implicated conduct was part of Trump’s official duties. Blanche and Bove nimbly draft around the fact that the dispute involves evidence which is presumptively barred by the SCOTUS immunity ruling — specifically testimony by Trump’s aide Hope Hicks — and not any official act itself. They also omit to mention that they are currently pursuing identical claims in state court, and that they vigorously pressed those claims during the nine weeks since the Supreme Court ruled in Trump v. US. It was only when it became clear that the New York appeals courts would not save them that they came racing back to Hellerstein — a classic case for Younger abstention.

Instead Blanche and Bove advance a bizarre theory about the end of Chevron deference (which they call Raimondo instead of Loper-Bright, for reasons unclear) and the Supreme Court’s ruling in Trump v. Anderson, which barred states from kicking him off the presidential ballot just because he tried to overthrow the government.

They seem to be suggesting that the prosecution based its felony claims on Trump covering up violations of state and local election law, and that in turn violates the Supremacy Clause? Also the FEC is now illegal under Loper Bright? And taken with Trump v. US, that means …

Well, look, no one actually knows what it means. But if Trump can get Judge Hellerstein to take the bait, he can postpone the sentencing and then fight about it after the election.

These three Supreme Court decisions “are as conclusive as the laws of Congress made in pursuance of the Constitution.” Cooper, 73 U.S. at 253. Treating them as such—by authorizing removal and permitting appropriate dismissal ligation in this District—is “essential to the peace of the nation, and to the vigor and efficiency of the government.”

And if the facts and the law are against you, pound the table.

People of The State of New York v. Trump [Docket via Court Listener]

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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DANY argues that there is a “serious question . . . whether a former President can claim absolute presidential immunity against criminal liability.” This Court need not decide this “serious question” for purposes of this motion because President Trump has not raised it in his removal notice.

What last week's second motion for renewal presupposes is … maybe he didn’t?

In May, the former president was convicted by a jury of 34 counts of creating a false business record to cover up another crime. He’s scheduled to be sentenced on September 18, and, judging by his increasingly desperate efforts to forestall the hearing, seems to think that it will be disastrous for his presidential campaign.

Trump has moved the trial court to vacate the verdict in light of the US Supreme Court’s immunity ruling, since his conviction was secured based in part on testimony of White House aides Hope Hicks and Madeline Westerhout, in contravention of the newly invented rule that official acts cannot be used as evidence, even when the crime charged is unrelated to a president’s official duties. He also requested to delay his sentencing until after the election, urging the court to consider the political calendar, even as he decries the prosecution as a purely political exercise.

New York Supreme Court Justice Juan Merchan promises to rule on the motion by September 16. Nevertheless, Trump’s lawyers have barged into the Southern District of New York demanding that US District Judge Alvin Hellerstein snatch the case away from Justice Merchan before he can finalize the judgment.

This would appear to be a classic case of Younger abstention, since the identical issue is currently under consideration in state court. But Trump’s lawyers Todd Blanche and Emil Bove have an answer for that and it is NO MORE CHEVRON DEFERENCE:

In Trump v. Anderson, the Supreme Court warned that states’ “power over governance . . . does not extend to federal . . . candidates.” 601 U.S. 100, 111 (2024) (emphasis in original). In Loper Bright Enterprises v. Raimondo, the Supreme Court overruled the Chevron decision, which required deference to agency interpretations, and implored courts to rely on their core interpretive competencies when interpreting statutes. 144 S. Ct. 2244, 2254, 2273 (2024). Anderson and Raimondo abrogated prior decisions that deferred to the FEC’s restrictive interpretation of the preemption clause in the Federal Election Campaign Act (“FECA”), which applies broadly to “any provision of State law with respect to election to Federal office” and therefore voids the New York laws that DANY applied to the 2016 Presidential election to try to manufacture nonexistent crimes. 52 U.S.C. § 30143.

At the risk of engaging with absolute bad faith horseshit like it’s real law, we’d note that even this SCOTUS wasn’t willing to detonate four decades of precedent in its zeal to blow up the administrative state. As Chief Justice Roberts wrote in Loper Bright, “[W]e do not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful—including the Clean Air Act holding of Chevron itself—are still subject to statutory stare decisis despite our change in interpretive methodology.” (The scare quotes around “interpretive methodology” are implied.)

Judge Hellerstein has been here with Trump before. In July of 2023, he tossed Trump’s first attempt to remove his New York criminal case to federal court under 28 U.S.C. § 1442. The court rejected Trump’s factual claim that Michael Cohen had been doing IRL legal work to earn his $35,000 “retainer” payments, as well as the legal argument that this work involved cleaning up Trump’s business so he could do president stuff, and was thus undertaken “under color of office.”

“Trump has not explained how hiring and making payments to a personal attorney to handle personal affairs carries out a constitutional duty,” Judge Hellerstein wrote. “Reimbursing Cohen for advancing hush money to Stephanie Clifford cannot be considered the performance of a constitutional duty. Falsifying business records to hide such reimbursement, and to transform the reimbursement into a business expense for Trump and income to Cohen, likewise does not relate to a presidential duty.”

Trump’s non-Chevron arguments for getting a second bite at the apple rest on the assumption that Justice Merchan’s failure to recuse entitles Trump to avail himself of “an unbiased federal forum to litigate at least two dispositive federal defenses: Presidential immunity and FECA preemption.” His lawyers scoff at Justice Merchan’s rejection of their immunity claim as untimely, coming as it did on the eve of trial, long after the motions deadline had passed, and they make no explanation for waiting 60 days after SCOTUS dropped its immunity ruling demand post-trial federal removal. Nor did they seek leave to file at such a late date , as would appear to be required under 28 USC 1455(b)(1) (h/t to MSNBC’s Lisa Rubin). But they said “good cause” about fifty times, so perhaps the court will overlook it.

“The First Removal Notice included a defense sounding in Presidential immunity but could not have anticipated the subsequent federal developments culminating in Trump v. United States,” they write, while simultaneously excoriating the prosecutors for running “roughshod over the Supremacy Clause—as related to Presidential immunity and preemption—in their desperate efforts to obtain an unsupported conviction.”

It’s the usual grievance-laden rant, replete with conclusory allegations and ad hoc attacks on the trial judge — par for the course from a defendant who tried to ward off a civil fraud suit by first suing New York Attorney General Letitia James in the Northern District of New York and then in Palm Beach County Civil Court. It didn’t work then, and it won’t work now — at least not with Judge Hellerstein. But six Supreme Court justices were willing to invent a doctrine of absolute presidential immunity to save his orange keister before so … who even knows.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker. 

The letter was in response to a demand from Trump to postpone the September 18 sentencing date until “after the election” in light of SCOTUS’s July 1 immunity ruling, which went so far as to bar evidence of official acts, even when the crime charged is not official. Justice Merchan has promised to rule by September 16 on Trump’s motion to vacate the verdict and dismiss the underlying indictment on grounds of presidential immunity, since the conviction and underlying indictment were both secured using testimony of former White House aides. Trump argues that a sentencing hearing on September 18 won’t allow him time to seek review and/or a stay from an appellate court.

Noting that getting the former president and his security detail into and out of the courthouse is a major undertaking, the prosecutors seemed to accede to a delay of the sentencing date so as to avoid forcing court staff to scramble to plan for a hearing which might be canceled at the last moment by an emergency stay.

“The Supreme Court’s recent decision did not consider whether a trial court’s ruling on that distinct evidentiary question is immediately appealable, and there are strong reasons why it should not be,” ADA Matthew Colangelo wrote. “Nonetheless, given the defense’s newly-stated position, we defer to the Court on whether an adjournment is warranted to allow for orderly appellate litigation of that question, or to reduce the risk of a disruptive stay from an appellate court pending consideration of that question.”

But much of the DA’s letter was taken up with the rhetorical equivalent of scratching your face with your middle finger.

To be fair, Trump’s lawyers Todd Blanche and Emil Bove, both alums of the Southern District of New York, started it last week with an unsubtle swipe at the state prosecutors:

As relevant here, after wrongly denying that Presidential immunity existed for months, DANY purported to authoritatively address the scope of Presidential power and the immunity doctrine, inaccurately, in a brief filed just 23 days after the Trump decision. They did so despite only limited federal litigation experience, with the notable and telling exception of a former high-ranking official from the Biden Administration, and without any input from the federal government that they felt worth mentioning.

The DA replied by noting that Trump’s fancypants lawyers had botched the state procedures when they suggested that “DANY should not be permitted to file a public sentencing submission that will include what the Supreme Court described as the ‘threat of punishment,’ in a manner that is personally and politically prejudicial to President Trump and his family, and harmful to the institution of the Presidency[.]”

Defendant’s concern about a “public sentencing submission” from the People is also misplaced. Any pre-sentence memorandum the People submit would be sealed. CPL § 390.50(1). The only way the memorandum would become public is if the Court orders otherwise or the defendant unlawfully discloses it.

They went on to observe that states are also responsible for adhering to federal law, and don’t need SDNY to ‘splain them how to apply the Supreme Court’s newly articulated immunity standard:

Finally, defendant’s apparent insinuation that state prosecutors are incapable of applying federal constitutional law is fundamentally flawed, given that the People and this Court protect and apply federal constitutional rights every day.

Gosh, it’s so weird how everyone thinks the SDNY guys are all assholes.

People of the State of New York v. Donald J. Trump [Docket via Law360]

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker. 

As it turns out, one of those cases involved Sanchez Energy, which was represented in part by Jones’ girlfriend. Jones then sought—and got—the role of mediator between Sanchez and its senior creditors, and in that role allegedly pressed them to accept a Chapter 11 settlement that would allow Sanchez to exit bankruptcy without dealing with the thorny issue of who would own the business, rechristened Mesquite Energy. Three years later, Jones’ longtime colleague on the Houston bankruptcy court, who appointed him mediator, decided it wouldn’t be those creditors, costing them hundreds of millions of dollars, they say.

And now that they know what we all now know about Jones’ personal life, they—specifically, Apollo Global Management and Fidelity Investments—say something else, and that is “bullshit.”

Thursday’s filing by Fidelity and Apollo seeks to participate in the Justice Department’s attempt to recoup some $21 million in fees and expenses that Jackson Walker was paid in chapter 11 cases that involved Jones and [Elizabeth] Freeman without any disclosure of their relationship.

Of course, “some” of $21 million is a long way from the hundreds of millions Apollo and Fido say they’ve lost, and unfortunately for Jones, Freeman and her former employers, they have an idea of where they might just get some more of it.

The lender group said it might have its own causes of action for damages against Jackson Walker, Freeman, Jones and “other third parties who participated in the fraudulent concealment of the romantic relationship.”

Fidelity, Apollo Say Judge’s Secret Romance Cost Them in Driller’s Bankruptcy [WSJ]

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Other news sources offer their own candidates: “Florida man nicknamed ‘Santa Claus’ pleads guilty to child porn charges,” or “Florida man drives semi-truck through strip club after getting kicked out.”

I mean, seriously, what hedge-fund manager wouldn’t want to live among such fellow citizens?

Suffice it to say, running a Ponzi scheme—even a $300 million Ponzi scheme—is fairly classic Florida, and hardly the kind of thing that would normally put you in the running for peak Florida Man. That being said, there are some notable things about the nine-figure fraud allegedly perpetrated by St. Augustine’s Russell Todd Burkhalter. For one, his Drive Planning’s pitch deck noted that the “bridge loan opportunities” offered were backed by $113 million in cash and real estate—in other words, one-third of the money he raised, such that he could conceivably have actually backed those “opportunities” with that amount of collateral and still had nearly $200 million to spend on Ponzi payments and other things.

And then there are the other things, which really give an insight into Florida Man’s psyche, like the $70,000 at Diamonds Direct, the $8,000 on IV treatments, the three-quarters of a million bucks on cars, the nearly $2 million on crypto, the unspecified assets that the SEC is worried he might transfer to his ex-wife and, of course, a boat.

Last October, Drive Planning transferred $3.1mn from a JPMorgan account to MarineMax for a yacht called “Stillwater”, with at least $2mn coming from investor funds. Burkhalter later renamed the boat “Live More”.

All pretty great Florida Man stuff. Still, he may have been topped by one member of his 100-strong team of sales agents. You see, these men and women funneled some $1 million a day in applications to be allegedly defrauded, with rewards like trips to Mexico, Greece and Canada (the latter presumably for the less-successful ones). And to make those agents seem respectable, they got little bios on the Drive website, which the aforementioned one used to list his or her interests:

Writhing and reading

Florida man accused of running big Ponzi scheme, buying big boat [FT]

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Since the beginning of this case, the defendant has argued that the judge is biased by his daughter’s work for a Democratic public relations firm. But even before Trump filed his first recusal motion in May of 2023, the judge consulted the New York State Advisory Committee on Judicial Ethics, which issued an opinion finding that “the judge’s impartiality cannot reasonably be questioned based on the judge’s relative’s business and/or political activities, and the judge is not ethically required to disclose them.”

Trump tried again in April of 2024, when he was rebuffed by both Justice Merchan and the First Judicial Department.

But after President Biden dropped out of the electoral race in July and was replaced by Vice President Harris, Trump’s lawyers Todd Blanche and Emil Bove renewed their motion for the judge’s recusal a third time, employing their signature brand of screaming hyperbole and gross innuendos:

President Trump is the Republican nominee and leading candidate in the 2024 Presidential election. Harris emerged as his presumptive opponent after it became apparent to the public that the Biden Administration’s lawfare against President Trump was motivated by President Biden’s alarming decline. Harris immediately framed her candidacy with a specific false reference to this case as a contest of “prosecutor vs. convicted felon.” Your Honor has insisted on maintaining an unconstitutional Gag Order, backed by threats of imprisonment made during the trial, that prevents President Trump from responding fully to that inaccurate attack. Making matters worse, this week the Biden Administration unveiled an unprecedented plot to mount a political assault on the Supreme Court in response to the Presidential immunity ruling that is central to President Trump’s pending motion.

The District Attorney’s Office responded that “Defendant’s motion to renew is a vexatious and frivolous attempt to relitigate an issue that was twice addressed by this Court in orders that the First Department then refused to disturb.”

“No amount of overheated, hyperbolic rhetoric can cure the fatal defects in defendant’s ongoing effort to impugn the fairness of these proceedings and the impartiality of this Court,” they added. “The motion for recusal should be denied for a third time.”

For his part, Justice Merchan seems entirely fed up with the exercise.

“This Court set a deadline of June 13, 2024, for the filing of post-verdict motions. Defendant did not file any motions by that deadline,” he noted testily, observing that Trump filed his motion a full 48 days after the deadline, without seeking the court’s permission, in what “would appear to be nothing more than an attempt to air grievances against this Court’s rulings.”

“Counsel has merely repeated arguments that have already been denied by this and higher courts,” the court concluded. “Defense Counsel’s reliance, and apparent citation to his own prior affirmation, rife with inaccuracies and unsubstantiated claims, is unavailing.”

Meanwhile, Trump’s pal Jim Jordan is staging a naked campaign to intimidate the judge and his daughter ahead of the September 18 sentencing and decision on Trump’s request to vacate the verdict based on the Supreme Court’s immunity ruling.

Rep. Jordan, who chairs the House Judiciary Committee, fired off a letter to the judge’s daughter demanding internal communications from her employer as well as messages to her own father. And if this young woman faces trollstorms or even physical danger because of Jordan’s craven political posturing, he does not care.

So for, though, the judge remains unintimidated. In a letter to the parties on August 5, he promised to render his decision on the immunity motion on September 16.

“Please note, the court appearance scheduled for September 18, 2024, at 10 A.M. remains unchanged,” he added ominously.

People of the State of New York v. Donald J. Trump [Docket via Law360]

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker. 

Activist investor Starboard Value has a stake in Starbucks and wants the coffee giant to take steps to boost its stock price…. If Elliott doesn’t gain representation on Starbucks’s board, it is possible the activist will pivot to launching a proxy battle for board seats. It isn’t clear whether or not Starboard could also eye a seat in the boardroom.

Elliott and Starboard are merely seeking to shake up the world’s biggest coffee chain into a more accretive frappé. Hindenburg Research’s Nathan Anderson, meanwhile, is looking to seriously shake up the world’s biggest country’s financial regulatory system.

Hindenburg published a report Saturday which alleged that both Madhabi Puri Buch, the chair of the Securities and Exchange Board of India, and her husband, Dhaval Buch, previously held investments in offshore funds also used by the Adani Group…. Hindenburg’s latest report comes roughly 18 months after it first accused the Adani Group of stock manipulation and corporate fraud.

On the bright side for the Buch family, they apparently aren’t exposed to Adani anymore.

Adani Group companies lost roughly $2.4 billion in market value Monday, recovering by the end of the session from an earlier reported fall of as much as $13.4 billion.

Activist Starboard Value Takes Stake in Starbucks [WSJ]
Adani Group shares shed billions after Hindenburg allegations against regulator [CNBC]

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Toward that end, AG Shitpost staged an absolute banger of a stunt at the Supreme Court last month with a trollsuit demanding that the justices halt New York state’s prosecution of Donald Trump to protect the First Amendment rights of Missouri voters.

“Missouri respectfully submits that the forgoing violations establish considerable harms to voters and electors in Missouri, who will be precluded from fully engaging with and hearing from a major-party Presidential candidate in the run up to the November election,” he wrote, referencing the gag order in Trump’s false business records case which is in place pending sentencing. “These harms are a direct consequence of New York’s calculated, unprecedented decision to prosecute Trump for alleged bookkeeping offenses just months before the Presidential election.” Naturally, Florida, Iowa, Alaska, and Montana filed an amicus brief, because stupid is a deadly contagion.

Bailey requested leave to file a bill of complaint, along with a stay of “any gag order or sentence against Trump until after the November Presidential election.” Then he demanded a preliminary injunction on the theory that “New York’s actions impose a sovereign harm to the ability of Missouri’s 10 electors to exercise their federal authority.” (The huge bong rip is implied.)

The state of New York responded that Missouri wasn’t being harmed, Trump himself was litigating the identical issue in state court, and OMG that’s now how standing works. (The huge eye roll is implied.)

Monday, the Supreme Court scraped that rancid smear of dogshit off its judicial shoe.

“Missouri’s motion for leave to file a bill of complaint is denied, and its motion for preliminary relief or a stay is dismissed as moot,” the Court wrote in a miscellaneous order published Monday. “Justice Thomas and Justice Alito would grant the motion for leave to file the bill of complaint but would not grant other relief.”

This is presumably a comment on Thomas and Alito’s beliefs about the Supreme Court’s original jurisdiction, rather than a comment on the case itself, since the order would appear to suggest that the two conservative justices would have denied Bailey’s requested injunction. That would accord with the order denying Texas AG Ken Paxton relief in a 2020 trollsuit against Pennsylvania seeking to prevent its certification of Biden’s win. Four years ago, Thomas, joined by Alito, wrote, “In my view, we do not have discretion to deny the filing of a bill of complaint in a case that falls within our original jurisdiction.”

And so it’s on to the next trollstunt by Bailey. Or perhaps not! Yesterday he saw off Donald Trump’s personal lawyer Will Scharf, who is being heavily backed by SCOTUS Svengali Leonard Leo, in a primary.

“Missouri has two Highly Respected Candidates running for the important Office of Attorney General, your current A.G., Andrew Bailey, and one of my very talented lawyers in private life, Will Scharf,” Trump wrote on Truth Social. “Both have fearlessly confronted the Radical Left’s destructive Lawfare and Weaponization of “Justice” with Great Wisdom, Courage, and Strength!”

No honor among thieves!

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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Sen. Richard Blumenthal (D., Conn.) said in a report last month that JPMorgan, Wells Fargo and Bank of America reimbursed about 38% of customers reporting unauthorized transactions in 2023, down from 62% in 2019.

Well, the Consumer Financial Protection Bureau isn’t quite so sure that those banks have quite as little liability for a thing they unleashed on the world. And if they’re going to pretend not to know the plain-English meaning of words like “initiate” and “unauthorized,” perhaps they—and by “they,” the CFPB means JPMorgan Chase, Bank of America, Wells Fargo and others—would like to explain why they’re doing so little to know their customers, as is generally required.

Part of the CFPB’s probe focuses on whether banks are proactive enough in shutting down accounts controlled by scammers, the people familiar with the matter said. The CFPB is also examining the degree to which banks vet the identity and background of deposit-account customers who end up being bad actors.

Regulators Probing Big Banks’ Handling of Zelle Scams [WSJ]

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Even the New York false business records conviction is in jeopardy, since the Court went out of its way to invent an immunity not just for official acts, but for evidence of official acts. Paying off a pornstar and then covering it up by laundering the payments through your private business is unquestionably unofficial conduct, but Trump’s conviction was secured with testimony from two presidential aides and his federal financial disclosure. So, even if Justice Juan Merchan rules that this was harmless error, it will be tied up in appeals for years. Sentencing is set for September, conveniently injecting Trump’s false business records conviction into the news cycle at regular intervals for the foreseeable future, and potentially pulling him off the campaign trail for court appearances.

And while Trump may escape a jail cell, he will not escape having his shit on main in a whole lot of courtrooms this fall. Some of that is by his own choice, as in the defamation suit he filed in Florida against ABC and George Stephanopoulos, who repeatedly suggested that Trump was an adjudicated rapist. In fact, the jury was unable to conclude that Trump managed to forcibly penetrate E. Jean Carroll with his penis, but did conclude that he was able to pin her against the wall while jamming his fingers inside her. Trump is inexplicably suing to remind us all once again that he is only a digital rapist, not a penile one. The case is set to go to trial in February, and discovery is ongoing after Judge Cecilia Altonaga denied ABC’s motion to dismiss.

Meanwhile, appeals of the $88 million verdicts in the Carroll cases continue apace, with oral argument before the Second Circuit set for September 6. Similarly, oral arguments in Trump’s appeal of the $354 million civil fraud verdict will likely take place in September or October before the New York Appellate Division.

On the criminal front, the Fulton County election interference case is functionally on ice, as is the Florida documents case, with the Eleventh Circuit asking the special counsel to brief his appeal of Judge Cannon’s Special Counsels Are Unlegal Akshully dismissal ruling in October.

But in DC, the federal election interference case is just getting back under way. Approximately 37 seconds after the Supreme Court relinquished control of the immunity decision, the DC Circuit remanded the case to Judge Tanya Chutkan to sort out the godawful mess SCOTUS made of it. She promptly set a scheduling hearing for next Friday to canvas the parties on how they intend to pick up the pieces. She also ruled on two of Trump’s pending motions to dismiss.

The one based on “statutory grounds,” in which the defendant claimed that nothing he did was against the laws, she denied without prejudice, inviting him to “file a renewed motion once all issues of immunity have been resolved.” This will presumably include an entire new section on 18 USC § 1512(c)(1), in light of the Supreme Court’s bizarro ruling in Fischer v. US that obstruction of an official proceeding has to involve destruction of paper documents.

Judge Chutkan also denied the motion to dismiss based on selective and/or vindictive prosecution. And this ruling was with prejudice in the extreme.

“At the outset, the court must address—as it has before—Defendant’s improper reframing of the allegations against him,” she began, adding that “The Indictment does not charge Defendant for publicly disputing the election outcome and merely ‘working with others’ to propose alternate electors.”

Trump’s legal theories in the underlying motion are beyond preposterous. Despite having promised to pardon the hundreds of January 6 defendants convicted for their efforts to block certification of President Biden’s electoral win, he complains that the government discriminated against him by treating him worse than his comparators. He claims that the appointment of a special counsel after he declared his candidacy is prima facia evidence of a plot to indict him, rather than the necessary protection to remove an ongoing investigation of a rival from the purview of the sitting president. He argues that articles in the Times and the Post reporting that Biden privately expressed his wish that Attorney General Merrick Garland would be more aggressive in his treatment of Trump was an express order in the form of a leak. And he insists that the indictment in DC must be vindictive, coming as it did on the heels of his decision to plead not guilty in the Florida documents case.

“Precedent squarely forecloses that line of reasoning,” Judge Chutkan scoffs, adding that “If vindictiveness could be established by new charges following a not guilty plea or a defendant’s public criticism of the prosecution, then defendants could effectively immunize themselves from superseding indictments by taking such action. That cannot be the law.”

This does not sound like a judge who is going to tolerate a lot of bullshit. But Trump’s lawyers are clearly about to launch an avalanche of it, insisting that the election interference case must be yanked out root and branch since the grand jury indictment was secured using testimony which is now excluded under the Supreme Court’s ruling. They’ll argue that every bit of the indictment, from the speech on the Ellipse to the pressure campaign to get Mike Pence to throw out valid slates of electors was part of his presidential duty.

It’ll be a massive, ugly fight. And at least the beginning of it will take place in the public eye, since Judge Chutkan scheduled the first hearing for August 16. Gentlemen, start your engines.

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

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After weeks of hyping Lemon’s new show on X-Twitter, the inaugural broadcast on March 8, 2024 featured an interview with the petulant billionaire himself. Musk was visibly uncomfortable with pointed questions about his drug use and apparent endorsement of antisemitic conspiracy theories and about the growth of hate speech on the platform.

“I don’t have to answer questions from reporters, Don,” he said testily. “The only reason I’m doing this interview is because you’re on the X platform and you asked for it. Otherwise, I would not do this interview.”

After the show, Musk texted Lemon’s agent “contract [with Defendants] is cancelled.” Which would appear to acknowledge the existence of a contract, although X-Twitter refused to pay Lemon on the theory that no such contract existed.

According to the complaint, the company aggressively courted Lemon in 2023 as advertisers fled the site in the wake of Musk’s erratic behavior, the disastrous rollout of Twitter Blue, and the uptick in offensive content.

“Defendants sought to affiliate with reputable figures whose name, likeness, identity, and reputation they could use to piggyback off of to retain advertisers,” he wrote. “Lemon was a top prospect. A gay, Black man with an excellent reputation and a household name, he was the perfect candidate to partner with to aid their dying advertisement revenue.”

Lemon and his agent were in regular communication with CEO Linda Yaccarino and Head of Content Brett Weitz in December of 2023 and January of 2024.

“You’re set up for a lot of $$ this year” Weitz texted Lemon on December 30. “You’re gonna make money faster than you think!”

“My job is to make sure that you feel like you’re in good company on the platform and I’m gonna do everything in my power to make sure that happens. This will be an awesome adventure for both of us,” Weitz added on January 6.

They hammered out the details of the agreement in detail, with $1.5 million base compensation for four long and ten short pieces per month, with ad revenue sharing and specific incentives for reaching subscriber thresholds (“$250,000 for reaching 4 million followers, $500,000 for reaching 6 million followers, $750,000 for reaching 8 million followers, and $1,000,000 for reaching 10 million followers”).

Despite having no written contract — really? REALLY? — Lemon duly showed up at a the Consumer Electronics Show in Las Vegas on January 9, where he appeared alongside Yaccarino as she worked the room trying to convince advertisers that X-Twitter was a stable platform to promote their brands. Lemon also hired producers, built a studio, and established the infrastructure to run a media business as per the negotiated agreement. And all the while, X-Twitter publicly promoted the partnership using Lemon’s name and likeness, piggybacking off the goodwill he had accumulated over decades in mainstream journalism. But after the disastrous March 8 interview, it all fell apart.

According to Lemon’s complaint, “Weitz spoke with Lemon by phone and told Lemon that Defendants were not going to pay him or follow through with the promises and representations made to him because there was no signed agreement, despite Musk previously representing to Lemon that there would be no need for a formal written agreement or to ‘fill out paperwork.’”

Interestingly, Lemon alleges that the company never intended to go through with the deal.

Defendants never intended to fulfill their representations and promises to Lemon. Instead, at a time when Defendants were under intense criticism and losing advertisers, Defendants only intended to publicize a partnership between X and Lemon, and thereby associate and promote the X brand with Lemon’s good name, likeness, identity, and revered reputation, in order to: (a) rehabilitate Defendants’ reputation; (b) promote the partnership and their association with Lemon on Defendants’ website (www.x.com), social media accounts, at promotional events, and elsewhere to sell advertisers on the X platform; and (c) otherwise profit and gain advantage commercially.

In potentially related news, California Civil Code § 3294 allows for punitive damages in cases of oppression, fraud, or malice.

The complaint alleges fraud, breach of contract, misappropriation of likeness, and unjust enrichment. Lemon demands a jury trial and unspecified damages.

“This case is straightforward. X’s executives used Don to prop up their advertising sales pitch, then canceled their partnership and dragged Don’s name through the mud,” his lawyer Carney Shegerian said in a statement provided to ATL. “You don’t have to be a genius to see the fraud, negligence, and reputational damage here. Don’s a hard-hitting journalist who’s committed to defending his good name. We look forward to our day in court.”

Meanwhile, New York Times tech reporter Kate Conger is out with a brutal profile on Yaccarino this week in which she reports that X-Twitter’s ad revenue continues to tank:

X executives told employees last month that 65 percent of advertisers had reactivated their campaigns, although they appeared to be spending less than they once did. Internal documents obtained by The New York Times show that, in the second quarter of this year, X earned $114 million in revenue in the United States, a 25 percent decline from the first quarter and a 53 percent decline from the previous year. The company aims to reach $190 million in U.S. revenue during the third quarter, bolstered by advertising associated with the Olympics, football and political campaigns, the documents said — but that target would still set the company’s quarterly earnings at 25 percent less than they were last year.

Luckily Elon Musk is a genius who has a plan to turn this thing around pronto. Just ask his blue check reply guys, they’ll tell you!

Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker. 

Well, the joke’s on us and, more acutely, on Citron Research’s Andrew Left.

The Securities and Exchange Commission alleged Friday that Left used his firm, Citron, to generate about $20 million in profits from illegal trading involving almost two dozen companies. The Justice Department also announced a criminal case against Left, accusing him of securities fraud and allegedly lying to investigators about compensation from hedge funds.

The hedge fund allegedly paying that secret compensation? Why, none other than the aforementioned small Canadian hedge fund no one’s ever heard of.

That million bucks Left allegedly received from Anson Funds is just a small part of the $20 million he’s alleged to have illicitly earned. The rest, sayeth the Feds, was just pure pump-and-dump in reverse.

“Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money,” the Justice Department said in its statement…. Left, according to prosecutors, would also quickly close positions after releasing a research report or making comments. That would let him take advantage of short-term price movements….

The SEC alleges Left bragged to colleagues that some of his statements caused retail investors to trade the way he wanted them to and that it was like taking “candy from a baby.”

Of course, as Left knows only too well, it isn’t always like taking candy from a baby. But it was apparently too thrilling to stop, even after the meme-stock mania taught Left to know better, and even after some FBI agents borrowed Left’s computers for a while.

Also, Left—not for the first time—is not only convinced he’s done nothing wrong, but that everything the Feds say he’s done is actually god’s work.

“The DOJ and the SEC threaten the integrity of the securities markets and put the health of our financial system at risk by trying to silence a publisher of truthful information who also trades in the securities he writes about,” said [Left lawyer James] Spertus.

US Accuses Famed Short-Seller Andrew Left of Securities Fraud [Bloomberg]

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But these two guys did: Cousins Andrew and Edward Stiles collectively made more than $1 million during the most exciting two weeks at Kodak in decades, after the former found out through his role at another pharma that Kodak was improbably going to be getting into his game, and then telling the latter about it. And unlike the many, many people who made many, many more dollars alongside them, they’re going to have to pay for it.

A Manhattan federal judge sentenced a former pharmaceutical executive from South Carolina to three months in prison Wednesday for taking over $500,000 of illegal trading profit based on his advance knowledge that Kodak would get a massive pandemic-era government loan…. "There is a real need in a case like this to deter others from engaging in insider trading," Judge [Ronnie] Abrams said. "A nonincarceratory sentence in a case of this sort, I think, would fail to send a message about deterrence."

That’s not good for Eddie, who made $200,000 more than Andy and will see how long he’ll join his cousin in the clink for on Sept. 6.

Ex-Pharma Exec Gets Jail For Insider Trading On Kodak Loan [Law360]

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Thomas Braziel knows this very well. His 117 Partners was very active buying up those claims that eventually paid out 100 cents on the dollar. That, however, doesn’t mean that Braziel doesn’t know a thing or two about (allegedly) stealing.

Braziel, while managing investment fund B.E. Capital Management Fund, started buying shares in Fund.com in 2013 through his investment fund, eventually owning about 20% of the company. He later petitioned to act as a liquidating receiver for Fund.com after the business was abandoned and was appointed by the court to act as receiver in November 2016. Braziel was mandated to liquidate the defunct company and distribute its net assets to its investors….

The court said Braziel started wiring money Fund.com received to his own personal account and used it to fund high-risk, high-reward investments. He also wired proceeds from the sale of the website address of www.fund.com to his own checking account.

Braziel used some of the proceeds to purchase a sapphire ring, a pair of emerald-and-diamond earrings and a German watch as well as on luxury hotel stays, art and apparel, the filing said. The court said he also used the money to buy bankruptcy claims, and to invest in cryptocurrency, leveraged loans and high-risk equities.

FTX-Claims Broker Thomas Braziel Stole $1.9 Million From a Receivership for Personal Gain, Court Says [WSJ]

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So let us then deal with the plain facts. Watson, a former media personality and Goldman Sachs alum, is facing 37 years in prison after being convicted of conspiracy to commit securities fraud, conspiracy to commit wire fraud and aggravated identity theft.

That last one, of course, was a doozy: Watson’s co-founder and eventual cooperating witness, Samir Rao, impersonated (badly) a YouTube executive in a failed effort to secure a $40 million investment from their former firm. This, a jury decided after hearing from both Rao and Watson, was not the result of nervous breakdown on Rao’s part (as Ozy explained at the time) nor an individual initiative on Rao’s part to help Ozy survive “at all costs and by any means necessary,” as Rao himself put it, with Watson being none the wiser, but instead a non-star turn planned and executed by both men in tandem. (Rao has pleaded guilty to his part in the Ozy fraud.)

Of course, Rao and Watson weren’t the only ones taking the stand during the month-long trial. Prosecutors also saw fit to force Google CEO Sundar Pichai to fly across the country to confirm that his company never contemplated buying Ozy, for $600 million or any other amount, even though Watson agreed that no such offer was ever on the table. Of course, prosecutors say Watson told other potential investors that Google had sought to buy the company, much as Rao allegedly turned a potential $25 million investment from Alphabet in exchange for luring Watson away from Ozy into a done-deal $30 million contribution to a fundraising round to convince others to invest in said fundraising round.

Watson continues to deny all criminal wrongdoing. That said, there are a few things he’d probably do differently in retrospect.

Watson, who hosted multiple Ozy shows and podcasts, told jurors he concentrated on the company’s content, staff, vision and partnerships more than on “making sure that every decimal is in the right place.” He said he traveled about four days a week and left finance and operations largely to Rao and others.

“I couldn’t be as hands-on as I probably wanted to be,” he testified.

Former TV host Carlos Watson convicted in trial over collapse of Ozy Media startup [CNBC]
Carlos Watson, Founder and Former CEO of Ozy Media Inc., Convicted of Multi-Million Dollar Fraud Scheme [press release]

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And, indeed, Mark Nordlicht did go to prison. Briefly, and not for any of the above, but for “lunging” and shouting at a prosecutor, which the judge in the case did not take particularly kindly to. But he will not be going back, because in spite of everything, the very same judge seems dead-set on thumbing his nose at any Platinum guilty verdicts, whatever those meddlers on the Second Circuit Court of Appeals have to say about it.

Platinum Partners LP co-founder Mark Nordlicht, who was found guilty of fraud in New York federal court, was sentenced to six months of home confinement by a judge who has consistently expressed skepticism about the government’s case.

US District Judge Brian M. Cogan, who previously overturned Nordlicht’s conviction in 2019 only to have it reinstated by an appeals court, sentenced him on Tuesday in Brooklyn, New York, to two years probation. When delivering the sentence, the judge noted that Nordlicht had “lunged” at a female federal prosecutor during his trial.

Given how he felt about the whole case, it’s sort of surprising that Cogan didn’t add, “but can you blame him?”

Platinum Partners Founder Gets Six Months House Arrest for Fraud [Bloomberg]

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