High-Profile Tech & Finance Cases: Legal Analysis & Implications

Scott Vicknair, injury attorneys, we fight for the win. Good morning everybody, welcome to the Overruled podcast. This is David Vicknair, I’m here with my co-host Brad Scott.

Good morning everybody. Welcome to the Overruled podcast, it’s brought to you by the Scott Vicknair Law Firm. It’s a great day in New Orleans, the heat is subsiding, we’re getting into the fall. It’s not a good day because the Saints are terrible. That was disappointing. Not sure if they’re going to lop Pete Corrigan’s head off or what they’re going to do about the offense, but it’s not good. We’re hoping for brighter days ahead for the Saints. But we’re currently in a rut.

So we’re going to talk about something else besides the Saints, Brad. We’ve got a couple of great topics today to talk about. Want you to kind of kick us off and tell us what you want to chat about today.

I’ve been looking at a thing with, if you haven’t been paying attention to it, the DOJ is going after Google once again. It’s a long line of antitrust actions that’s been filed against Google over the years. And basically they’re kind of going after them. It’s kind of interesting. They’ve, they’re arguing that Google has monopolized search, traffic, and they also argue that Google has monopolized, something with they call the ad tech and how you buy your ads and things of that nature.

The, the big thing that kind of struck out to me, though, is that you’ve heard the expression history repeats itself. Only the names and the faces change. If you remember back in the early ’80s, AT&T was the biggest company basically in the world. Controlled all of the phone lines, controlled all of the phone, phone devices themselves. We would refer to as Ma Bell. DOJ and them went in, they broke it up, basically.

So you had this situation where you have this massive private entity that had this public product that everybody became relying on. They broke them up. You know, 20 years after that, in the 1990s, it sounds a lot like energy.

Exactly. The same kind of thing. Hope my power is not cut off when I get home tonight.

Then you fast forward another 20 years, and I don’t know if you remember the whole Microsoft antitrust lawsuit.

Sure.

Well, they, you know, DOJ went after them again for search, saying that their internet explorer browser, they did exclusive deals with various companies and computer manufacturers to kind of snuff out the competition. At one point, I think Microsoft had 90% of the search volume going through the internet. They broke them up and allowed other people like Netscape at the time and the Googles of the world to come into existence. And all of a sudden, 20 years later, Netscape, what happened to them? They kind of just disappeared, fell off the face of the plan. Forgot that they even existed.

But like, every 20 years, we’re going to go through this system where we’re kind of breaking up these tech companies. So 20 years later, you fast forward now, now we have the DOJ going after Google, saying, hey, Google, you’ve gotten too big. You have all the search volume, you’re controlling all these ad platforms, and you have this big problem. And it seems like it’s kind of a, it’s, it’s, it’s more of a big picture problem that I see that keeps repeating itself.

We have these large technological advances that happen, whether it’s the invention of the telephone, or, you know, search, internet, these types of things, but they’re developed by private companies. But then we put them out in the public space, and the public, it becomes almost part of our public infrastructure. Everybody’s relying on it for their day-to-day lives. And then we have them, these are publicly traded companies. As a publicly traded company, they have an obligation to build value for their shareholders. They do that by growth. Through either horizontal or vertical acquisitions and things of that nature.

So we, we keep repeating these same problems over and over. You know, don’t you think, and I don’t want to jump in here. Don’t you think that kind of, I think what crystallized that for me recently was whenever Elon Musk and the Ukraine and Russia conflict was putting the Starlink service, internet down in Ukraine. And so it kind of got my brain working and thinking like, this is a private company that’s publicly traded, and he’s got an obligation to the shareholders to maximize share wealth, etc., etc. But it’s like this quasi public private issue, right? Like he’s wading into a mass war, an armed conflict, as a private individual.

Not the same, but it that made me think. Well, putting his technology in there, now they’ve become users of that technology. So my point I’m trying to make is that we keep seeing this same cycle repeat itself, kind of over and over, every 20 years. And I think it’s kind of the nature of the way technology is developed. Our private sectors are the ones developing. And it’s been a kind of took from that, is, you know, look at what’s happening with AI now. That’s our next big technological advancement. We do have Washington kind of putting their hand in there, trying to regulate it somewhat, but they’re more regulating it from the use standpoint. You know, can this be used for good? Can it be used for bad?

But maybe these need to start thinking ahead as far as how we structure this technology, who are going to be the owners of this technology before the cat gets out of the bag again. And we develop this massive, behemoth technology that’s privately owned, that the public is relying on to, you know, do daily functions. But it seems like, I mean, every 20 years, we just keep repeating this cycle and this situation.

And Google has been the subject of many antitrust lawsuits by the DOJ and various governmental entities. It’s really going on in Europe as well, right now. They’ve kind of gotten ahead of it, they’re trying to break it up. But, but it’s interesting, you know, we keep building these behemoths of tech companies and then we keep trying to break them up. And what’s going to happen with that? Are we going to keep repeating this pattern of going or what are we going to do with it? It creates an interesting public versus private problem on these, public infrastructure type technologies that we rely on every day.

I think I saw and I don’t know if you ran across this in your research, Brad, but I think I saw on Squawk Box the other morning on CNBC that, the DOJ is also filing a lawsuit against Amazon under the similar types of theories. And it became this question of like, is Amazon really a monopoly? But I guess it becomes a difficult for the prosecutors. How do they discern from your perspective, like what is a monopoly and what isn’t? What case they could win on those grounds?

I know it’s super complicated and we don’t have time to like go through probably all the factors. And federal FTC, whatever monopoly law is and I’m not an expert in that. But Google does kind of feel like a monopoly. They’re big. I call them the bully that we, we, we play, what we play with them, we have to get the reviews, we have to understand their algorithm. Like they’re the bully who controls the schoolyard and we’re kind of in the schoolyard, right?

And the thing is, is like with Google, there is Bing. Like how much does that play into it? Like how does that play into it? I mean, there are other options, right? Like Bing has search. And then now we know with the advent of, which a lot of our listeners, listeners may not know, but TikTok is actually taking a lot of search, not a ton, but some search, fractioning a tiny bit of search off of Google, believe it or not.

Yeah, they really kind of created the short form video content. They were kind of the leaders on that. And now you have YouTube, who does the same thing, which is an existing Google type product. But, but it’s, you know, like, you know, kind of to go back to your point, a lot of these allegations have already been floated and tested against Google in prior lawsuits. So a lot of the commentators are saying that they’re kind of rehashing some of the same arguments that were made before that Google’s already kind of gotten around and beat.

But you brought up the other actions, you know, there’s other tech giants that are facing the same scrutiny. Amazon, Facebook, Meta, even Apple. The interesting one about Amazon, I read a little bit of the allegations in that one. They’re actually accusing of Amazon, which is the marketplace for people to buy and sell. And I don’t know if people realize this, but there’s a lot of, a lot of sellers on Amazon, including Amazon selling its own products. But apparently they have gotten to the point where they’ve programmed their platform where their prices will fluctuate based on what their competitors on the Amazon marketplace are also selling at. So they’re kind of manipulating those things and putting their products ahead of the other sellers. And it kind of is a very anti-competitive behavior there.

In those situations, I think it’s a little bit cleaner case as far as the DOJ is concerned, or the FTC as far as they’re really manipulating the marketplace itself for anti-competitive purposes. So, all these tech giants are facing some level of scrutiny. It’s been ongoing for a while. The thing is, you know, what is our government going to do to try to get ahead of these things in the future and stop these technologies from being, they’re happy to let them develop and, you know, make the world a better place. But as a company, they want to get bigger and better and grow. But when that happens, they get their hands slapped at some point too. And we have to break, you know, pull them back a little bit.

And especially from like a public policy standpoint, some of them end up being so large, they have like the GDP of a small country in Africa, right? And it’s like, and so when, this is countries in Europe. I mean, they’re huge. When, when Meta and and Meta and Google and some of these companies are so massive, it does become this conflict or this inherent retraction between whether it’s a quasi public, quasi private entity and whether or not the public has an interest in some of them being controlled and not be that large.

Yeah. But by its very nature, they’re privately held companies. They’re traded on stock exchanges. When they make this money, they have to do something with it for their shareholders. Which is acquisition. They grow and by its very nature, they keep getting big. So it’s an interesting problem. I don’t know how to solve it. But, you know, it’s something we should be having a discussion about, especially now that we have this new technology in the form of AI tech that will probably, you know, 20 years from now, we’ll probably be sitting here talking about that as well and how they’re breaking up. Whatever company took the lead on that.

So it’s, it’s, it’s a repeating problem. From the telephone industry through Google now and probably into the future into the AI technology.

Well, certainly an interesting topic and I’m interested to see where that case pans out and what ends up happening in that case. And it’s funny, as we’re talking about, we’re trying to talk about too much legal things on the show, make it more interesting and go into business and other areas of interest for our listeners. But we’ve just happened to have two really interesting high profile like lawsuits going on. So my topic is also a very interesting high profile lawsuit. And that is the, federal lawsuit against Sam Bankman-Fried, the founder of FTX.

For those of you who don’t know much about this, this is a super high profile thing because Sam Bankman-Fried started first, a company called Alameda Research. And Alameda, it was really sort of like a hedge fund. And so it was a hedge fund that had a lot of assets, made a lot of money that he was involved with. And I think it had some involvement in cryptocurrency and Bitcoin and things of that nature. And ultimately, this young guy, I’m not sure how old he is, but he’s definitely like younger than 30.

And believe it or not, some people I watched a 60 Minutes special on this Sunday night, a couple of days ago, in the author Michael Lewis, who has written the Blind Side, like the Big Short, like I’m not sure if he wrote the Big Short actually, but super, financial world author. Actually spent hours and hours and hours with Sam Bankman-Fried before he was indicted by the federal government. And also was allowed back in his parents’ house with his ankle bracelet on with him and spent additional hours and hours interviewing and getting to know him. And so I really recommend if anybody’s really interested in the story, go find that 60 Minutes piece with Michael Lewis on Sam Bankman-Fried and FTX’s collapse. It’s so interesting and really kind of delves into the facts of it. Some of them are mind blowing.

Some of our listeners may know because of when FTX was on the rise, some people legitimately suspected that Sam Bankman-Fried may be the world’s first trillionaire. That’s how serious this whole advent of FTX was. And a lot of listeners may also be aware of him because he had high profile spokespeople like Tom Brady, Steph Curry. Everybody was drinking the Kool-Aid. Everybody was drinking the Kool-Aid. But they were drinking the Kool-Aid for lots of money.

FTX paid Tom Brady $55 million for 20 hours a year for three years. That’s a pretty good hourly rate, wouldn’t you say?

Tom’s not doing too bad. He paid Steph Curry $35 million to be a spokesperson. And then Larry David, who starred in a popular 2022 Super Bowl ad for them, received $10 million. So everybody got paid really well to be a spokesman and.

That’s an interesting thing to from a legal standpoint to know because they’re because FTX is not a licensed broker. Some of these individual spokesmen actually have legal liability potentially personally for the actual collapse of FTX and what ultimately happened. They were being paid with other people’s money, it was the problem.

So Sam Bankman-Fried starts Alameda Research, which is a hedge fund, and ultimately gets run by his girlfriend, who he has a falling out with. And he discerns and decides that the cryptocurrency and blockchain trading world, all the different mediums that it is traded on. So keep in mind, like very basically, Bitcoin, all this stuff. The idea or the concept behind it is we want to remove the institutions. So there is no bank. Like when we, you wire money to somebody, when you Zelle money to them, etc. It all goes through a bank, through institutions. Sometimes between two banks before it gets to each of our accounts, right?

It was anti-establishment. And they wanted an anonymity in the system. Right. And so Sam Bankman-Fried, a young guy, who’s very smart, realizes that these mediums that the cryptocurrency and blockchain are trading on are deficient in one way or another. And starts FTX, which is otherwise like a very good business. I mean, think of him as like a blockchain cryptocurrency credit card processor. Like if he just, this thing’s trading billions upon billions upon billions of dollars in cryptocurrency across it. And so if he’s just getting a tiny piece, a little slice of that, this is like a real business. Like we don’t have to do much, we’re not doing the trades, we’re not active day trading, we’re not taking risk. We’re just the medium that all of this stuff pushes across.

So the issue becomes, however, that FTX, being this new advent, blockchain currency, can’t go in and just get bank accounts, or so he claimed. And so all of a sudden, Sam Bankman-Fried starts getting these billions upon billions. And when we’re not talking like two billion, we’re talking like 20, 30, 40, 50, 60. The amount of billions of dollars being traded on this thing is unimaginable. However, all the money’s being stored in bank accounts at Alameda Research, the hedge fund. And not actually put into FTX bank accounts. Which they claimed was because FTX couldn’t get bank accounts and because of its nature being a cryptocurrency trading current.

The details around this are somewhat crazy. I mean, he’s and he really starts learning about Sam Bankman-Fried, he’s this eccentric person who doesn’t believe that you have to manage people. So at some point in time, FTX has over 200 employees. And he believes none of them should have to be managed. They have a four point something million dollar penthouse down in the Bahamas. They moved the operations down to the Bahamas. And essentially what happens is they were, they had a legitimate business. In my opinion, in FTX, which could have been a good business.

But all of this money that was being stored in Alameda Research starts getting siphoned off to other things.

Yeah. They started playing with their customers’ money basically.

Exactly. So FTX, I mean, think of it almost like a bank. People are depositing money there to trade cryptocurrency. So then they’re taking that, those deposits and they’re using it to play on their end, on investments and speculative things. And basically funnelling that money over to Alameda Research company, for them to trade on that money. So they’re taking in these deposits, there are people are trusting them with these deposits, so that money’s available for them when they want to do trades. But they’re taking that money and siphoning it off and using it for their own play toys and games and stuff like that. That’s where the fraud comes in. That’s one of the major allegations against them on the, on the in the action against it.

Yeah. And ultimately, what he’s been accused of, his federal prosecutors have charged him with orchestrating, essentially a vast scheme to siphon billions of dollars of FTX customer money into political contributions, real estate purchases, charitable donations, and venture investments. He’s also accused of lying to his venture capital backers and to the companies that lend FTX money.

In November, there was essentially a run on deposits, which forced FTX to shut down all withdrawals with more than $8 billion. With a B. $8 billion in customer funds missing. Just that he just misplaced $8 billion. He didn’t know where it was. It was under the bed.

Five weeks later, prosecutors in Manhattan charged him with eight counts, including wire fraud, securities fraud, commodities fraud, money laundering, and campaign finance violation.

Some of the stuff that he was involved in is really unbelievable. I mean, he was donating immense amounts of money to PACs, which were supporting the Democratic Party. But then, this 60 minutes special was fascinating. This kid, he meets Michael Lewis to jump on a private plane to go and meet with Mitch McConnell in Washington DC, who is the Senate minority leader at the time. But probably the most powerful Republican person in Washington. And he’s got a suit crumpled up in his hand because somebody told him that Mitch McConnell liked people who were presentable. And he was going to meet with Mitch McConnell to give Republicans money to try to elect anti-Trump Republican candidates.

And then this got even more fascinating in the piece is he was actually working out a plan to pay Donald Trump a certain amount. We don’t go into politics. And this show, so we’re not like really like commenting on one side or the other. We’re just reporting. The fact was like fascinating, is he was coming up with a number and floating it through intermediaries, how much money could they pay Donald Trump to not run for president?

To do what?

Yeah. And the floated number was somewhere around $5 billion. And they were kicking that around, I’m assuming he was even thinking about paying him that. But then this whole happened. Because he didn’t have.

Michael Lewis’s column or he didn’t have $5 billion to pay Trump.

Yeah. The people’s money. It was happy to write checks with unfortunately.

But that’s where the fraud really comes in. And he’s spent other people’s money in ways he shouldn’t have. He used it as his own. And yeah, $8 billion later, these people are now looking for their funds. There’s prosecution flying around. And the more interesting thing is, as you mentioned earlier, some of these private individuals who were in business with him may find some culpability here and maybe subject to some damages actions.

Yeah, it is a concerning thing. I think for people like Steph Curry, Tom Brady and some of those high profile spokespeople. And I’m going to be honest with you, before this story broke, I had no understanding of this. That if you do, do spokesperson work for, I don’t want to get this wrong, but I think it’s like unlicensed brokerages or brokerages who are not accredited through either licensing. Basically no government oversight. No government oversight that you may have personal culpability for your promotion. I don’t know the details of that. But I think they’re all very concerned about it, rightly so.

And because of the amount of money lost, that $55 million that Tom Brady could got to be a spokesman could end up costing him way more.

Yeah, they want to get, they don’t want to claw that back. They want to get those moneys from somewhere. Not just the $55 million, but the potential for personal liability if he does have any personal liability. I mean, I’m sure Tom Brady’s worth anywhere from two to $400 million. And I don’t think he would like to have his personal assets at risk for being a spokesman for a company.

So, big issues there for the spokespeople. And then the biggest issue I see in the case and in the federal prosecution for Bankman-Fried, is, you know, that he’s got an uphill battle in court because three of his closest colleagues, Alameda’s chief executive, Caroline Ellison, who was his former girlfriend. They kind of had a falling out and stopped talking to each other before he got indicted. As long as with two of FTX’s co-founders, that would be Nishad Singh and Gary Wang. All three have pleaded guilty to fraud charges and signed cooperation agreements to testify against him.

So the federal government’s got three witnesses who have pleaded guilty and cut a deal underneath him to go to trial and testify against him. Not to mention the admissions he made early on when he was being indicted and arrested and how he effed up and apologizing. I mean, it seems like it’s a pretty clean case as far as convicting this guy. It’s just a matter of what they’re going to do with him and how are they going to get some of this money back from these other third parties. That’s what’s going to be the really interesting aspect of the case that you hit on.

There have been preliminary issues which were rolled on by the judge in this case. It was Judge Kaplan, which have not gone his way. Originally, he did allow bail and let him out on an ankle bracelet. But, since August, Mr. Bankman-Fried has been in jail and had to prepare his case from a jail cell in Brooklyn because the judge revoked his bail when he found that he had repeatedly tried to interfere with witnesses in the ongoing case.

So, I think he’s got an uphill battle in the case. I don’t know much about, you know, we’re not federal prosecutors, federal, you know, criminal prosecutors. But I do think he’s got the deck stacked against him. I mean, it’s just the, the, the overarching big picture that the jury’s going to hear is like billions of dollars went missing. And his some of his defenses that have been floated around are he’s blaming the lawyers who advised him that he could do some of these transactions between FTX and Alameda.

Regardless, you’re still responsible. Right.

And so with the three testifying witnesses who have cooperated with the federal government against him, along with the billions of dollars missing, it’s just an interesting story to me, big picture because they were talking about this kid being a trillionaire and FTX revolutionizing the federal, the, you know, the cryptocurrency trade around the world. And now his future may be compromised because he played funny with the money.

Yeah. I mean, the lasting impression from this also is that, you know, people always chasing the next big thing. They always want to make money and do these investments. And a lot of times these high returns that are promised from various companies, they come with high risk. You know, everything in life is a risk reward tradeoff. And people weren’t really looking behind the scenes to see what was going on with this company before throwing a lot of money at him. And, you know, some of these people that lost money, there’s a little, there’s a little dirt on their hands too for not doing their homework.

Well, no funny money. I mean, and the thing that struck me too in the in the 60 minutes speech, piece and then everything I read afterwards and preparation for the show, is just the utter lack of financial controls. I mean, there was zero. There’s no CFO. I mean, the disorganization of this company. And look, not every company can afford a CFO. And typically in a company’s growth, they have to be a lot bigger, right? You get to some form of organizational structure and accountability. You get to 60, 70, bigger employees. You start getting to the point where you need some type of chief financial officer and some type of financial controls in place.

And ultimately, when you’re a company like this with over 200 employees and you’re, you’re messing with billions of dollars of investors. The idea that you wouldn’t have financial controls in place for somebody to like look and say, hey, why do we have $8 billion sitting in an Alameda Research account when these are investors and owners and people who have put money in FTX?

Yeah. Somebody’s got to ask those questions. But it just shocks me that people would turn over their money to companies like this without doing a little homework.

Yeah. So his trial is expected to last six weeks. I’m sure the federal government’s case against Google is going to last even longer.

So took about years on that.

Yeah. That those, monopoly cases can go for months and months.

So, they’re both going to be interesting cases to follow and see where they fall. I think they’re interesting topics and they’ve been in high profile cases in the news, both Google from a monopoly standpoint and Bankman-Fried because of the utter size of that and the amount of money missing and an FTX collapsing along with the high profile spokespeople. So it’s been an interesting show and I’m excited to see where they land.

It will be fun to see what happens for sure.

All right, thank you all for listening. As always, we hope you found these interest topics interesting. Hope you enjoyed the show. Once again, this is David Vicknair, along with my law partner and co-host, Brad Scott. This has been the Overruled podcast, brought to you by the Scott Vicknair Law Firm. Looking forward to talking to y’all next time. Y’all take care.

Scott Vicknair, injury attorneys, we fight for the win. Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal or tax professional before taking any action.